OLATUNDE'S LAW NOTES

EU LAW - DRAFT N0TES

2009-11-07T08:59:00.001-08:00

The European Court of Justice and Court of First Instance

The Courts: The European Community has a three-tiered court comprising the European Court of Justice (ECJ), the Court of First Instance (CFI) and a third tier of Judicial Panels.

The function of these Courts is to ensure that, ‘in the interpretation and application of the Treaty, the law is observed’ (see Article 220 EC). This wording provides a grounding for the ECJ’s dynamic case law which upholds the ‘Rule of Law’.

Composition

The ECJ consists of 27 judges, one from each Member State, who are assisted by eight Advocates General. The judges and Advocates General must be chosen ‘from persons whose independence is beyond doubt and who possess the qualification required for appointment to the highest judicial offices in their respective countries or who are jurisconsults of recognised competence’ (Article 223 EC). They are either academic lawyers, judges or senior lawyers of the competence to be appointed to the highest judicial office. For the Court of First Instance, the status required is slightly less exalted: ‘persons whose independence is beyond doubt and who possess the qualification required for appointment to high judicial office’ (Article 224 EC). In the ToN, in response to problems caused by the backlog of cases waiting to be heard at the European Courts (roughly two years for either Court), the wording of the Treaty in regard to the number of judges in the CFI was changed from one per Member State to ‘at least one judge per Member State’ leaving open the possibility (not yet acted upon) of appointing additional judges to this Court. Both Courts elect their own presidents. The term of office is a renewable six years; there is a partial replacement every three years. The ECJ normally sits in chambers of five or three judges; it rarely sits in plenary session but it can for highly significant cases. Where a Member State or an institution is one of the parties, they can request the Court to sit in a Grand Chamber of thirteen.

The methodology and jurisdiction of the European Court of Justice

The procedure consists of:
1 a written stage
2 brief oral argument
3 presentation of the Advocate General’s opinion
4 judgment by the ECJ.

This procedure relies heavily upon written documents, and oral argument is intended mainly to fill gaps or elaborate on specific points.

The role of the Advocate General

An Advocate General is appointed to each case before the Court and delivers his/her opinion before the Court itself considers the case. The role of the Advocate General is to present a reasoned and exhaustive examination of the facts and the relevant law and to give his opinion on how the case should be decided. This opinion will clearly have a great influence on the Court but it is not binding. Although the Court in a majority of cases will follow the Advocate General’s opinion, in some important cases, the ECJ has chosen not to do so. See, for example: Advocate General Lenz in Case C-91/92 Faccini Dori v Recreb where the ECJ refused to follow his opinion proposing horizontal direct effect of Directives (see further Chapter 6). Sometimes, however, opinions influence the future development of the law by the ECJ in later cases. The judgment of the ECJ itself is always a single collegiate judgment; there are no dissenting opinions. There is no formally established system of precedent in EC law, however a de facto system has developed although sometimes the ECJ will depart from its earlier case law. It has consistently stressed that any national court is free to re-refer a question to the Court which has already been addressed although in practice, rulings of the Court are treated as precedents by the national courts. As already mentioned in the second chapter, the ECJ adopts a teleological or purposive approach, considering the overall aims and objectives of the Treaty, actually using the ‘spirit’ or ‘inherent system’ of the Treaty as grounds for a decision. The jurisdiction of the Court is divided between: direct actions: Articles 226, 227, 228, 235, 288, 230, 232 EC. Direct actions take place before the Court of First Instance preliminary references from the national courts: Article 234 EC. Where a case in a national court raises an issue of EC law, the national court may refer a question concerning the validity or interpretation of EC law to the ECJ for a ruling under the Article 234 EC reference procedure. The ECJ rules on the point of EC law in the form of answers to questions posed by the national court, but does not determine the outcome of the case. The decision on the point of EC law is sent back to the national court which applies it in the case before it. The national court determines the outcome of the case.

Article 226 EC: Actions by the Commission against Member States in breach of their Community law obligations.

Article 228 EC: Another action by the Commission if the Member State fails to remedy the breach.

Article 227 EC: Action by one Member State against another for breach of Community law obligations.

Articles 235/288 EC: Actions for damages by individuals against the Community institutions.

Article 230 EC: Action for judicial review.

Article 232 EC: Action for failure to act against Community institutions.

Article 234 EC: Where a question of the interpretation or validity of Community law arises in a case before the national court, the court may refer the matter for a preliminary ruling to the ECJ.

The Court of First Instance

The caseload of the ECJ has increased dramatically since the EC was established, with the result that it takes a very long time for cases to reach the Court and judgment to be made. In order to alleviate this problem, the Single European Act in 1986 provided for the establishment of a CFI with limited jurisdiction under Article 225. The CFI was established in 1988 by Council Decision 88/951 and began work in the autumn of 1989. The CFI currently consists of 27 members, one per Member State. It sits in chambers of three or five judges. It does not have separate Advocates General but it may call on one of its members to perform the task of an Advocate General; this person may not then take part in the judgment of the same case.

Originally, the CFI was given jurisdiction to hear staff cases based on the EC treaty, actions brought by coal and steel undertakings under the ECSC Treaty and, importantly, actions brought by undertakings under Article 230 EC and Article 232 EC relating to the implementation of the competition rules applicable to undertakings. When you study competition law, many of the cases you will consider will be actions brought by companies (undertakings) seeking judicial review of decisions of the Commission, brought in the CFI under Article 230 EC.

The jurisdiction of the CFI has subsequently been extended so that it now has jurisdiction over all actions under Article 230 EC (judicial review), Article 232 EC (actions for failure to act), Articles 235 and 238 EC (actions for damages against the Community), except for those reserved in the Statute of the Court of Justice for the ECJ. Article 51 of the Statute currently states that direct actions brought by a Community institution, the Member States or the European Central Bank (ECB) must be heard before the ECJ.

Therefore the cases of greatest importance are heard before the ECJ. It is possible for the Statute to be amended. Since the ToN, Article 225(3) EC also permits the CFI to take preliminary rulings under Article 234 EC in certain areas to be laid down by statute. This power has not yet been activated: competition law will probably be the first area to be included. When the CFI does eventually take such references and it considers that a case involves a matter of principle likely to affect the unity or consistency of Community law, it may refer the case to the ECJ for a ruling instead. Its decisions under Article 234 EC may also be exceptionally subject to review by the ECJ for the same reason. The CFI also acts as an appeal court for the Civil Service tribunal which hears staff cases.

Appeals from decisions of the CFI

Note that appeals from decisions of the CFI on points of law may be made to the ECJ and must be made within two months. The expansion of the jurisdiction of the CFI attempted to improve the delays in the system of justice in the European courts which was expected to be exacerbated by the recent expansion to include twelve new Member States. At the time of writing, the increase in the number of judges following enlargement has in itself improved the situation.

Judicial Panels

Another innovation introduced by the ToN to address the problem of the backlog of cases in the European courts was the amendment of the EC Treaty to allow for the creation of judicial panels to hear and determine at first instance certain classes of action or proceedings brought in specific areas (Article 225a EC). The first of these judicial panels has now been established (Article 225a EC and Decision 2004/752/EC). It is the ‘European Union Civil Service Tribunal’ which has jurisdiction to hear cases involving disputes between the Community institutions and their servants (staff disputes) at first instance. As Staff cases constitute 25 per cent of the cases brought each year, this will considerably ease the burden. It is attached to the CFI and has its headquarters at the CFI. There is an appeal to the CFI which can, exceptionally, under Article 225(2) EC then be reviewed by the ECJ where there is a serious risk of the unity or consistency of Community law being affected. The Civil Service Tribunal consists of seven judges, appointed for six years. They are appointedby the Council acting unanimously after consulting a committee made up of seven former members of the ECJ and CFI and lawyers of recognised competence. The first judges were sworn in in October 2005.

The main qualifications are that they must be independent and ‘possess the ability required for appointment to judicial office’.

Articles 246–248.

The Court of Auditors (which is not a court in the legal sense) describes itself as ‘the financial conscience’ of the EC. It was established in its present form by the 1975 Budgetary Treaty and was added to the list of Community institutions in Article 7 EC by the TEU. It is composed of one auditor per Member State who ‘shall be chosen from among people who belong or who have belonged to respective audit bodies or who are especially qualified for this office’ (Article 247 EC). Its task is to examine the accounts of the Community and audit the accounts of revenue and expenditure of the Community. This audit is not simply an accounting measure, for the
Court of Auditors must examine whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. It has the power to request information and publishes an annual report which is adopted by a majority vote. This is published in the Official Journal along with the response of the institutions. It is often highly critical of the financial management. The Court of Auditors is meant to present the Parliament and the Council with ‘a statement of assurance as to the reliability of the accounts and the legality and regularity of the underlying transactions’ (Article 248 EC).

It was reported in the Times on 5 April 2005 that ‘in the ten years since the independent Court of Auditors was asked to vet annual Community accounts produced by the European Commission, it has not once given them “a positive statement of assurance”, equivalent to a clean audit report’ (writer, Patience Wheatcroft).
In addition, it may publish special reports on particular topics, such as:
food aid the dairy quota system agricultural fraud.

The institutions of the European Community

The European Council

The European Council is not listed in Article 7 EC, but it is of great importance. It originally arose out of informal meetings of the heads of state or government of the Member States during the 1970s. Since 1974, it has held regular summit conferences and its composition has been formalised. It now meets at least twice a year. At these meetings, high-level decisions about the future development of the European Union are made and disputes between Member States (for example, the amount of budget contributions) are addressed. The European Council, however, has no legislative powers, and any legislative action must be taken by the Council of the EU. The European Council was first given a legal basis by the Single European Act. Under the TEU, it is ‘to provide the Union with the necessary impetus for development and to define the general political guidelines’ of the EU (Article 4 TEU). It comprises: the heads of state or government of the Member States
the ministers for foreign affairs the President of the Commission
one other member of the Commission.

The European Council has a leading role under the two intergovernmental pillars.
The Lisbon Treaty provides for the European Council to become an institution. It also
provides (in Article 9b (5)) for an election by qualified majority of a President by for a term of two and a half years, renewable once. In the event of an impediment or serious misconduct, the European Council can end the President’s term of office in accordance with the same procedure

The European Central Bank (ECB)

The ECB can be described as a ‘quasi-institution’; it is listed in Article 8 EC. It was set up by the Treaty on European Union to introduce and manage the single currency, the euro, and then to determine and implement the EC’s economic and monetary policy. It is part of the European System of Central Banks (ESCB), the other members of which are the national central banks. This network covers all Member States but only 12 of these are members of the Economic and Monetary Union (EMU). The ECB is located in Frankfurt, Germany.

The ECB has an Executive Board, composed of a President, a Vice-President and four other Elections are held in accordance with national voting systems, since the Parliament’s proposals for a uniform, Community-wide electoral procedure – drawn up according to Article 190(4) EC – have not yet been accepted. MEPs are elected for a five-year term. The Parliament elects a President and 14 Vice-presidents. It draws up its own Rules of Procedure (Article 199 EC). Much of the EP’s work is done in political groups and committees. As mentioned above, MEPs are organised into transnational political groups, which are represented in the EP’s 20 standing committees. These standing committees do the preparatory work for the main sessions of Parliament; each committee is chaired by a chairman and also has a vice-chairman and secretariat. The committees are responsible for adopting reports on legislative proposals.

In the TEU, the European Parliament was given the power: to set up temporary committees of inquiry (Article 193 EC) to appoint an Ombudsman (Article 195 EC).
The Ombudsman’s task is to consider allegations of maladministration by Community
institutions or bodies, other than the Courts acting in their judicial role. He may initiate an investigation himself or respond to a complaint received from an individual or via an MEP.

The Ombudsman will then report to the EP and to the institution concerned.
The TEU also introduced Article 194 EC, allowing all citizens of the EU to petition the Parliament. Any citizen, resident or company with its registered office in the Union may petition the Parliament.

The Parliament is peripatetic – most of its plenary sessions are held in Strasbourg (France), for one week per month but most of the committee meetings are held in Brussels, Belgium; its Secretariat is in Luxembourg. This is clearly inefficient and wasteful but attempts to rationalise its organisation have met with resistance from the host Member States. The TEU introduced Article 191 EC, which emphasises the importance of the development of political parties at European level. At the moment, the low turnout at European Parliament elections undermines its claim to address the democratic deficit. The establishment of pan-European political parties may improve this situation in the future.

The Citizenship Articles in the Treaty (Article 19 ex Article 8b) provide that every citizen of the Union shall have the right to vote and stand in local and European Parliament elections in any of the Member States. In two cases, C-145/04 Spain v UK [2006] ECR I-7917 and C-300/04 Eman and Sevinger v College van Burgemeester en Wethouders van Den Haag [2006] ECR I-8055, the ECJ agreed that nationals of a Member State resident overseas (in Gibraltar in the first case, on the Caribbean island of Aruba in the second) should be allowed to vote in national and EP elections. In the ‘Gibraltar’ Case the UK had made rules providing for Gibraltar UK citizens to vote after the ECHR ruling in: Matthews v UK [1999] ECHR 12 whereas in the second case the Dutch government had attempted to exclude the Aruba residents from voting although Dutch nationals resident in a non-EU country had such rights.

See: Case 103/83 Luxembourg v EP [1984] ECR 1945. A 1983 resolution was incompatible
with the Member States’ decision concerning the provisional location of the EP’s places of work and was therefore void. See also Case 358/85 France v EP (Re
Brussels Meetings) [1986] ECR 2149. page 42 University of London External System
3.2.3 Powers and functions of the EP The adoption of the budget Article 272 EC
In 1957 the European Parliament was essentially just a ‘talking shop’. The first important extension of its powers was made by the two budgetary Treaties of 1970 and 1975. The Parliament was given the task of adopting the budget in conjunction with the Council. The procedure, in broad outline, is as follows.

The Commission draws up the draft preliminary budget and sends it to the Council.
The Council, in consultation with the Commission, adopts a draft budget which is sent to the Parliament. The Parliament can approve the draft budget; if it does nothing then after 45 days the budget is deemed to be approved. Alternatively, the Parliament has the option of proposing changes to the budget.

The Community budget consists of two parts:

compulsory expenditure – ‘expenditure necessarily resulting from this [EC] Treaty’ (Article 272(4) EC)

non-compulsory expenditure.
The Common Agricultural Policy (CAP) takes up most of the budget for compulsory
expenditure; the CAP amounts to some 45 per cent of the whole EC budget. The EP may
only propose modifications to compulsory expenditure. The Council has the final say in regard to compulsory expenditure. On the other hand, the Parliament has the ultimate say in regard to non-compulsory expenditure and at this stage it may propose amendments to non-compulsory expenditure. When this is done, the budget is returned to the Council.

The Council then decides (always acting by a qualified majority) whether to accept the changes suggested by the Parliament. It cannot overturn the amendments to non-compulsory expenditure but can reverse the Parliament’s modifications to compulsory expenditure. The budget is returned once more to the Parliament which decides whether to accept it or not. The Parliament can, for ‘important reasons’ (Article 272.8 EC), reject the budget as a whole and it did so in 1979 and 1984. In this way it can, therefore, have the final say over the adoption of the budget as well as over non-compulsory expenditure, but, as we can see, it has used this power sparingly. The Lisbon Treaty now provides that the Parliament will have the final say over all of the budget, both compulsory and non-compulsory expenditure.

The Parliament’s role in the legislative procedure

In 1957 the European Parliament’s only role in the enacting of legislation under the Treaty was to be ‘consulted’ when so required by the Treaty. This procedure applied in a limited number of areas of EC competence. Where required by the Treaty, the Council had to send its final legislative proposal to the Parliament for its opinion before the proposal could be legislated. The Council did not have to incorporate the Parliament’s opinion or give reasons for rejecting it. The ECJ, in the first of a line of cases which strengthened and consolidated the Parliament’s position in the EC legal order, ruled that the Parliament must be consulted when so required by the Treaty. Failure to observe this essential procedural requirement is a ground for nnulment under Article 230 EC. See: Case 137/79 Roquette Frères v Council [1980] ECR 3333.

Co-operation Procedure Article 252 EC

The SEA (1986) introduced a major extension of the European Parliament’s power with the introduction of the ‘co-operation procedure’, Article 252 EC. Where this procedure applied (what procedure must be used is specified in the particular Treaty Article giving competence to legislate) the Parliament’s role was much increased. Now there was a second reading for the Parliament and, if the Parliament vetoed the proposal, it could only be enacted by the Council acting unanimously. So a ombination of the Parliament and one Member State acting together could defeat a proposal for legislation. The SEA also introduced the ‘assent procedure’ where the EP, voting by an absolute majority of its component members, is given the power of veto in a limited number of areas such as Accession of new members (Article 49 TEU) and signing of Association Agreements. This procedure now also applies to the suspension of a Member State for serious and persistent breaches by a Member State (Article 7(1) TEU).

The institutions of the European Community page 43
Co-decision procedure Article 251 EC
The ‘co-decision procedure’ (Article 251 EC) was added to the EC legal order by the TEU. Now the European Parliament legislated in conjunction with the Council and finally had the power of veto over legislation. This procedure was significantly extended in scope by the ToA which also replaced the co-operation procedure by co-decision in all areas except those relating to Economic and Monetary Union. The ToA also greatly simplified the co-decision procedure in a way that strengthened the position of the Parliament so that the European Parliament finally became a co-legislator with the Council in those areas in the Treaty to which this procedure
applies. It is now the most widely used legislative procedure. This enhancement of the importance of the European Parliament’s role in the legislative process of the European Community is a highly significant development in the history of the Community (legislative procedures are discussed further in detail in Chapter 4). The Lisbon Treaty extends the codecision procedure to become the normal legislative procedure. The Parliament’s status in judicial review proceedings

In the 1957 Treaty of Rome, the European Parliament was not mentioned as one of the
institutions which had standing to bring an action for judicial review under Article 230 EC. This is discussed in Chapter 4 but it is important that you should be aware of how the powers of the EP have been strengthened by the European Court of Justice (ECJ) in regard to Article 230 EC. This would be relevant to an essay on the changing role of the Parliament since 1957. In a series of highly creative judgments, the ECJ rewrote the Treaty in order to give the European Parliament the status of an institution whose actions could be judicially reviewed where they had legal effects with respect to third parties, and to bring actions itself under Article 230 EC to protect its prerogatives. (This is described as a semi-privileged
applicant, see Chapter 8.) See: Case 294/83 Les Verts v EP [1986] ECR 1339; Case 302/87 EP v Council (Comitology) [1988] ECR 5615; Case 70/88 EP v Council (Chernobyl) [1990] ECR I-2091.

These changes were then formally recognised in the changes to the EC Treaty introduced by the TEU. In the Treaty of Nice, the European Parliament was given the status of a ‘privileged’ applicant under Article 230 EC, putting it in the same position as the Council, the Commission and the Member States, having unrestricted standing in judicial review proceedings. This gives the European Parliament the power to challenge acts of the other institutions.

The Parliament has used its powers under Article 230 to challenge the legal base of legislation where it considers that a legislative procedure over which it had more influence should have been used. See: Case C-295/90 EP v Council Re students Rights [1992] ECR I4193; Case C-187/93 EP v Council (Waste Case) [1994] ECR I-2857.
The Parliament’s role in the appointment of the Commission The position of the Parliament has been significantly strengthened in regard to the appointment
of the Commission. Since the TEU, the appointment of the Commission as a
whole has been subject to a vote of approval by the European Parliament; since the ToA,the nominee for the President of the Commission has also had to be approved by a majority vote of the Parliament.

For the censure vote under Article 201 EC by which the European Parliament can, by a twothirds majority, force the resignation of the Commission as a whole, see below where this is discussed in regard to the Commission.

In the Treaty of Lisbon, as under the Nice Treaty, the Parliament still can only approve the entire Commission as a body. On the basis of the Parliament’s consent the European Council then appoints the Commission by a qualified majority.
The Commission must reply to oral and written questions from the Parliament (Article 197 EC); the Council has accepted that it should respond to questions from the Parliament, as required by the Parliament’s own Rules of Procedure (Rules of Procedure 44, 45 and 46). Each year, the Parliament poses roughly 4,500 written questions and 600 questions for oral response; this is a very significant part of its role as scrutineer of the other institutions.#

A protocol on ‘the Role of National Parliaments in the EU’ was annexed to the ToA; it
requires the Parliament to send to the national parliaments all consultation documents and legislative proposals of the Commission. A new Article in the Lisbon Treaty sets out the role of national parliaments in the EU. This includes a ‘yellow card’ subsidiarity check for national parliaments.

Structure and powers of the Commission

The European Commission is the institution which, above all, represents the Community’s interest. Its role is:

to propose new policies and initiate legislation
to act as the ‘Guardian of the Treaties’ – the Commission is the ‘watchdog’ concerning infringements of Community law
to enact delegated legislation
to act as the executive of the EC, implementing EC policies and supervising their implementation by the Member States.

In certain areas, the Commission has the power to legislate in its own right. It also has powers:

to mediate between Member States in the Council
to represent the EU in external relations.

The Commission currently consists of 27 members (Commissioners) † chosen on the
grounds of their general competence, by the governments of the 27 Member States. They
draw up a short-list of three candidates from which the President of the Commission
selects the Commissioner. According to the Nice Treaty, each new Member State will be
entitled to nominate a Commissioner until the European Union consists of 27 Member
States when a rotation system, based on the principle of equality, will be introduced. At the time of writing, however, there are still 27 Commissioners and this would change when the Lisbon Treaty comes into force.

The independence of the members of the Commission must be beyond doubt; this is the
most important requirement. They must act in the interest of the Communities and be
completely independent in the performance of their duties. They are not permitted to
seek or to take instruction from any Government. Their term of office is five years and is renewable.

Appointment of the Commission

The President of the Commission is nominated by the Council meeting in the composition of heads of state or government and acting by qualified majority and this person is then subject to a vote of approval by the European Parliament. The Commissioners, one from each Member State, are then selected by the President-elect from a short-list of three submitted by each Member State; the Commission as a whole is then subject to a vote of approval by the Parliament. The current President is Jose Manuel Barroso. The President then appoints the Vice-Presidents from among the Commissioners. He also selects which Commissioner will hold which portfolio (see below). The Commissioners as a whole make up the College of Commissioners which takes decisions by a simple majority vote. Although the Parliament does not have the power to veto the appointment of individual Commissioners, it can veto the appointment of the Commission as a whole. This power is rarely used but several proposed Commissioners have been forced to withdraw after the Parliament had signalled its disapproval. Thus, the European Parliament demonstrated that it can effectively supervise the Commission and that its powers are to be taken seriously. Until the enlargement in 2004, the five larger states (France, Italy, Germany, UK and Spain) had Two

The Commission 2004–2009

In 2004 a new Commission was appointed under the Presidency of Jose Manuel Barroso.
Its term of office will expire in 2009, after the elections to the European parliament. The intention was that the Lisbon Treaty would be ratified by that time so that it could enter into force at the same time. There are 27 Commissioners. Each Commissioner has a private office (or cabinet) headed by a chef de cabinet. The cabinet usually consists of five officials appointed by the Commissioner (added by the ToN). The President of the Commission has an important and influential position, being responsible for: policy initiatives; shaping overall Commission policy
coordinating Community policy. The President of the Commission also has the power:
to ‘decide on its internal organisation in order to ensure that it acts onsistently, efficiently and on the basis of collegiality’ to appoint Vice-Presidents and to allocate portfolios among the Commissioners and to reshuffle them during the Commission’s term of office to request a Member of the Commission to resign, having obtained the approval of the College of Commissioners. Structure

The Commission is divided into a number of departments called Directorates-General (DGs)or Services, which are similar to ministries, each covering different areas of policy such as: agriculture;fisheries, transport and energy,research, environment
the internal market competition employment and social affairs taxation and customs union education and culture trade external relations justice and home affairs.
The Director General of each area of policy is answerable to the Commissioner given
responsibility for that area.

As well as the Commissioners and their cabinets, the Commission currently employs about 25,000 permanent staff, equivalent to civil servants, of whom about 2,300 are translators and interpreters. With 23 official languages, the Commission requires a large number of translators and interpreters to work each day and the staff translators and interpreters are supplemented by a large number of freelance translators and interpreters. Meetings of the College of Commissioners are convened by the President and take place at least once a week. Voting is by simple majority.
he institutions of the European Commission

Functions of the Commission: ‘Watchdog of the Community’ or ‘Guardian of the Treaties’?

The Commission has a number of main roles as watchdog of the Communities.
Under Article 226 EC The Commission is entrusted with the role of investigating infringements of the Treaties by the Member States. Where possible, the matter will be resolved informally by negotiation and discussion; where this is not possible, the Commission brings the Member State before the ECJ. The Court may then make a Declaration that the Member State is in breach of its duties under the Treaty. This used to be the only penalty that the Member State incurred.

Under an additional procedure introduced by the TEU, Article 228 EC has permitted the
Commission to bring a further action against a Member State that has not complied with the ECJ’s Article 226 EC judgment, which may result in the ECJ imposing fines (see Chapter 8). Under Articles 81 and 82 EC These are the provisions that govern competition law in the Community and the Commission has the principal role in this area. It develops policy and legislates, and it has responsibility for enforcing these provisions against undertakings (companies) that are in breach. It investigates, comes to a decision and, where appropriate, imposes penalties.
Initiation of policies and legislation The Commission has the very important role of initiating legislation – all legislative proposals are drawn up by the Commission. The Council and European Parliament can propose policies for legislative action to the Commission under Articles 208 EC or Article 192 EC, respectively, but the Commission has the final say on whether the proposal is drawn up into a legislative proposal. It is also responsible for drawing up the annual legislative programme.
These powers give it the role of ‘the motor of integration’.
This refers to the Commission’s role in initiating and drawing up legislative proposals which take the policies and objectives of the European Community forward. Its proposals have the effect of furthering the aim of completion of the internal market which means further integration.

Legislative powers

The Commission can legislate unilaterally in a limited number of areas, i.e. under Article 39(3)d EC and Article 86(3) EC. Where such a power is granted, these powers enable the Commission to enact legislation in a true sense. See: Joined Cases 188–190/80 France, Italy and United Kingdom v Commission [1982] ECR 2545.
The ECJ has also determined that when the EC Treaty gives the Commission a specific task, it impliedly confers on the Commission the powers that are indispensable in order to carry out that task, including the necessary legislative powers: Joined Cases 281, 283– 285, 287/85 Germany, France, Netherlands, Denmark and the United Kingdom v Commission [1987] ECR 3203. The Commission also enacts delegated legislation under powers conferred by the Council This accounts for a large proportion of the Community’s legislation each year (see Chapter 4 for further details). The Commission also puts forward policy initiatives such as the White Paper on Completing the Internal Market put forward in 1985 (see Chapter 2).

Executive powers

The Commission oversees and supervises the implementation of European Community
policies in the Member States by the national authorities and seeks to ensure uniform
application. It has an important role in the drawing up and adoption of the Community budget in conjunction with the European Parliament.

It also has significant powers of expenditure, especially in regard to the Common
Agricultural Policy (CAP) and to structural funds, through which funds are channelled to poorer regions of the Community.

External relations

The Commission represents the European Community in its dealings with other states and with international organisations. The Commission represents the Community at the United Nations as well as representing the Community in its negotiations with WTO and other international organisations. It represents the Community at the Council of Europe. It represents the Community at the Organisation for Economic Co-operation and
Development.

Censure of the Commission Article 201 EC

The European Parliament has always had a power to dismiss the Commission as a whole (by a two-thirds majority of the votes cast) in a vote of censure under Article 201 EC [Article 144 EC]. In January 1999, such a vote was taken as a result of allegations of fraud, mismanagement and nepotism† against the Commission. The necessary two-thirds majority was not achieved, but the European Parliament set up an independent Committee of Inquiry. When this Committee reported back in March 1999, its report was highly critical of the Commission. It found that individual members of the Commission had indeed made inappropriate appointments and had failed to act in response to allegations of continuing irregularities in programmes for which they had responsibility. The Commission as a whole was found to have failed to take collective responsibility.

When the individual Commissioners named in the report refused to resign, the whole
Commission resigned rather than face a further vote of censure from the European
Parliament, which it might well have lost.

Lisbon Treaty proposals

The Lisbon Treaty makes provision for a ‘High Representative’ who will represent the Union to the outside world, and who is appointed by the European Council. (S)he is, however, also a Vice-President of the Commission and the Lisbon Treaty provides (in Article 9E 4): The High Representative shall be one of the Vice-Presidents of the Commission. He shall ensure the consistency of the Union’s external action. He shall be responsible within the Commission for responsibilities incumbent on it in external relations and for co-ordinating other aspects of the Union’s external action. In exercising these responsibilities within the Commission, and only for these responsibilities, the High Representative shall be bound by Commission procedures to the extent that this is consistent with paragraphs (2) and (3).
Paragraphs (2) and (3) deal with the High Representative’s functions representing the
Council (see 3.4.1)

The Treaty of Lisbon provides as follows:

Article 9D (4) The Commission appointed between the date of entry into force of the Treaty of Lisbon and 31 October 2014 shall consist of one national of each Member State, including its President and the High Representative of the Union for Foreign Affairs and Security Policy who shall be one of its Vice-Presidents. The Lisbon Treaty further provides as follows (in Article 9 D (5)). As from 1 November 2014,
the Commission shall consist of a number of members including its President and the High Representative of the Union for Foreign Affairs and Security Policy, corresponding to two thirds of the number of Member States, unless the European Council, acting unanimously, decides to alter this number. The members of the Commission shall be chosen from among the nationals of the Member States on the basis of a system of strictly equal rotation between the Member States, reflecting the demographic and geographical range of all the Member States. This system shall be established unanimously by the European Council in accordance with Article 211a of the Treaty on the Functioning of the European Union. Article 9 D(7) A candidate for Commission President is to be proposed by the European Council by qualified majority to the European Parliament and elected by a majority of its component members.

† Nepotism (from Italian nepote= nephew) is the granting ofmoney, jobs and privileges topeople who are one’s relatives.

The Council of the EU - The Role and compositionThe Council was known as the Council of Ministers until 1993, when its name was changed to the Council of the European Union. The Council represents national interests – the interests of the Member States. It is the main legislative and decision-making body of the Community. It considers legislative proposals from the Commission and, usually acting by qualified majority vote (QMV), it decides whether to enact them or not. Under the 1957 Treaty of Rome, it was the only legislative body, with sole power to enact legislation. As we have seen in the section above, this power has increasingly been shared with the European Parliament, reflecting the Parliament’s status as the one democratically elected institution of the Community.

The Council is composed of representatives of the Member States at ministerial level,
authorised to commit the government of that Member State to specific action. Each
government delegates to the Council one of its members according to the matter being
discussed at any particular meeting. For example, national ministers of agriculture make up the Agricultural Council and national ministers of finance constitute the Economic and

Finance Council.

The position of President of the Council is occupied by each Member State in turn, for a period of six months. This position has become increasingly high profile; the President will have an agenda and will initiate proposals. There is now an informal arrangement whereby the current President of the Council works in conjunction with the previous and next President. The changes made by the Lisbon Treaty It had become clear that with the advent of twelve new Member States, it was no longer practical to have a revolving Presidency which changes every six months. For the present,
under the Nice Treaty France follows Slovenia in July 2008, followed by the Czech Republic and Sweden. In the Draft Constitutional Treaty provision was made for so-called ‘Trio’ presidencies, so that the Member State holding the Presidency before and after the current Presidency holder would work together with that country and provide support and assistance with their programme. These would be composed so as to consider the established order of rotation, and the size and geographical location of Member States. This was taken up by the Council in an amendment of its Rules of Procedure in September 2006: ’Every 18 months, the three Presidencies due to hold office shall prepare, in close cooperation with the Commission, and after appropriate consultations, a draft programme of Council activities for that period’. In drawing up the joint presidency programme, Slovenia collaborated with Germany and Portugal, both of which presided over the Council of the EU in 2007. In December 2006 they submitted to the General Affairs Council a joint 18-months programme drawn up in accordance with the Council’s Rules of Procedure. The Presidency has no function attributed to it in the EC Treaty; its original tasks were to convene and chair Council meetings and sign legislation and other acts, such as international treaties,
on behalf of the Council, but it has gained far greater importance as the Community has developed and now has specific tasks under the second and third pillars.

In particular, under the second pillar, the Presidency is charged with representing the Union in matters coming within the foreign and security policy (Article 18(1) (ex Article J.8(1)) TEU). The President of the Council represents the Community on many important occasions in the international arena. Any country holding the Presidency is intent on achieving special objectives which it usually announces at one of the summit meetings of the European Council before the beginning of its Presidency and presents to the European Parliament after having consulted the Commission. Particular emphasis will be laid on some aspect of Community policy and the Presidency will endeavour particularly to push through Community measures concerned with such objectives. The Treaty of Lisbon proposes an elected President of the Council who will work in tandem with the President of the Commission. Article 9b (5) provides: The European Council shall elect its President, by qualified majority, for a term of two and a half years, renewable once. In the event of an impediment or serious misconduct, the European Council can end the President’s term of office in accordance with the same procedure.

The High Representative

Article 207 (ex Article 151) EC, inserted by the Maastricht TEU, gave recognition to the General Secretariat of the Council under the responsibility of a Secretary-General. The Treaty of Amsterdam added a Deputy Secretary-General, both to be appointed unanimously by the Council. The Secretary-General oversees the day-to-day work of the Council,but now also acts as the Council’s High Representative in the common foreign and security policy. In October 1999, the first High Representative, ‘Mr CFSP’, appointed to the newly restructured office was Xavier Solana, up to then Secretary-General of NATO, who soon afterwards was also appointed Secretary-General of the Western European Union. The Treaty of Lisbon introduces a ‘High Representative’ for whom provision is made as follows. Article 9 E(1): ‘The European Council, acting by a qualified majority, with the agreement of the President of the Commission, shall appoint the High Representative of the Union for
Foreign Affairs and Security Policy. The European Council may end his term of office by the same procedure.’

Article 9 E(2): ‘The High Representative shall conduct the Union’s common foreign and
security policy. He shall contribute by his proposals to the development of that policy, which he shall carry out as mandated by the Council. The same shall apply to the common security and defence policy.’

Article 9 E(3): ‘The High Representative shall preside over the Foreign Affairs Council. As indicated above, in addition, the High Representative is to be one of the Vice-Presidents of the Commission.’ (See Article 9 D(4).) The Lisbon Treaty provides in Article 9 C(1): ‘The Council shall act by qualified majority voting
except where the Treaties provide otherwise.’ Article 9 C(4): ‘As from 1 November 2014, a qualified majority shall be defined as at least 55 per cent of the members of the Council, comprising at least 15 of them and representing Member States comprising at least 65 per cent of the population of the Union. A blocking minority must include at least four Council members, failing which the qualified majority
shall be deemed attained. The other arrangements governing the qualified majority are
laid down in Article 205(2) of the Treaty on the Functioning of the European Union.’ Further arrangements governing the qualified majority can be found in Article 205(2) of the TFEU. Article 9(5): ‘The transitional provisions relating to the definition of the qualified majority which shall be applicable until 31 October 2014 and those which shall be applicable from 1 November 2014 to 31 March 2017 are laid down in the Protocol on transitional provisions.’ Under Article 208 EC, the Council may request the Commission to initiate legislation in some particular area; the wording suggests that the proposals should be in general terms but in fact the Council has used it to propose quite specific proposals and has made increasing use of this power. This has altered the balance between the Commission and the Council by, to some extent, undermining the Commission’s monopoly over initiatives for legislation.

Voting in the Council

The Council can legislate either unanimously, by a qualified majority or (now in very rare cases) by a simple majority. The voting system varies between different policy areas and is specified in the relevant Treaty Article. Where the Council is required to act by a qualified majority, the votes of its members are weighted according to a system provided by Article 205(2) EC. The legislative procedure set down in the Treaty for any particular competence is crucial; the influence of the Parliament and the form of voting required in the Council make a great deal of difference to how easily a particular measure will be enacted. Voting strengths in the Council are listed in Article 205 EC and the distribution of votes for each Member State (after accession in January 2007 of Romania and Bulgaria) is as follows:
Germany, France, Italy, United Kingdom, each 29
Spain, Poland, each 27
Romania 14
Netherlands 13
Belgium, Czech Republic, Greece, Hungary, each 12
Austria, Bulgaria,Portugal, Sweden, each 10
Denmark, Ireland, Lithuania, Slovakia, Finland, each 7
Cyprus, Estonia, Latvia, Luxembourg, Slovenia, each 4
Malta 3
Total votes 345

For a QMV, 258 votes are required, which is 72.3 per cent of the total (where the legislative proposal does not come from the Commission, a two-thirds majority is required). A new and very significant element to voting weights was added by the ToN and came into effect on 1 January 2005:

In addition to the qualified majority specified above, a Member State may ask for confirmation that the votes in favour represent at least 62 per cent of the total population of the Union. If this is found not to be the case, the decision will not be adopted. This provision favours Germany, with its large population, and makes up for the fact that its weighting of votes does not properly represent its size. In general, small countries are still over-represented in terms of the weighting of votes and this new requirement compensates, to some degree, for this.

For a QMV on a Commission proposal, ‘at least a majority’ of the Member States must be in favour. Where the vote is taken on a proposal not put forward by the Commission, then two-thirds of Member States must vote in favour. The Treaty of Rome set out a transition to voting by qualified majority from unanimity at the end of the transitional period. However, because of France’s opposition, virtually all
decisions made by the Council between 1966 and the enactment of the Single European
Act were taken without a vote and on the basis of unanimity (see Chapter 2). This practice was the result of the 1966 Luxembourg Accords or the Luxembourg Compromise, according to which the Member States agreed that unanimity would be applied in cases when important national interests were at stake. This political agreement was not legally binding.

Nonetheless, as it had the effect of giving each Member State a veto, it hampered European Community decision-making severely until the adoption of the Single European Act. The Single European Act (1986) introduced qualified majority voting for measures to complete the internal market, and this transformed the decision-making processes of the Community. In the Treaty of Amsterdam, the Luxembourg Compromise was also ‘allowed to creep into the new Article 23 TEU, second sub-paragraph’ which provides for action in the second pillar, the Common Foreign and Security Policy, by qualified majority in adopting joint actions and in taking decisions implementing joint action. However: If a member of the Council declares that, for important and stated reasons of national policy, it intends to oppose the adoption of a decision to be taken by qualified majority, a vote shall not be taken. The Council may, acting by a qualified majority, request that the matter be referred to the European Council for decision by unanimity.

The institutions of the European Community

The ‘Ioannina Compromise’ on enlargement

In March 1994, at the European Council meeting in Ioannina in Greece, new Member States were about to be admitted to the Community. The proposal was that on accession of the new Member States Austria, Sweden, Finland and Norway (which later refused to join after a referendum) the number of votes required for a ‘blocking minority’ would rise from 23 votes to 27 votes. This proposal met with opposition from the UK, initially supported by Spain. It advocated the retention of the present system, which would mean that two large Member States could block a decision with the support of just one small Member State. Raising this number, as had been done previously upon the accession of other countries, would mean that at least one other country’s votes would be needed to obtain a blocking minority. In Ioannina, Spain soon dropped its opposition to the proposal, leaving the UK exposed. Eventually, a compromise was reached which was acceptable to the UK and negotiations for new membership could proceed. The relevant part of the European Council’s Decision (paragraph c) was as follows:

If Members of the Council (of Ministers) representing a total of 23 to 26 votes indicate their intention to oppose the adoption by the Council of a decision by qualified majority, the Council will do all in its power to reach, within a reasonable time and without prejudice to obligatory time limits laid down by the Treaties and by secondary legislation, such as in Articles 189b and 189c (now Articles 251 and 252) of the EC Treaty, a satisfactory solution which could be adopted by at least 68 votes. During this period, and always respecting the Rules of Procedure of the Council, the President takes, with the assistance of the Commission, any initiative necessary to facilitate a wider basis of agreement in the Council.

After three, rather than four, countries had joined in January 1995 the number of 26 votes was amended by a Council Decision to 25 and the number of 68 votes to 65 votes.
At Ioannina it had been agreed that the whole question should be re-examined by the 1996 inter-governmental conference (IGC). However, agreement could not be reached there and the Treaty of Amsterdam in a ‘Declaration to the Final Act’ states that the Compromise shall stay in place until the entry into force of the first enlargement, thus confirming the binding nature of the agreement. Unlike the Luxembourg Accords, it is not limited to ‘very important interests’, so it could be used on any matter and this makes it potentially more open to abuse than the Luxembourg Accords. Whether the Agreement was justiciable has never been tested by the ECJ. The Court has held that any Community act which creates legal effects, irrespective of its nature, is an act sui generis which is subject to the Court’s
jurisdiction. See Case 22/70 Commission v Council (ERTA) (1971).

Thus, two agreements concluded under pressure mostly from one particular country in
each case, were given legitimacy by incorporation into the Amsterdam Treaty. The Nice
Treaty had been thought to have effectively repealed the Ioannina Compromise in its
Protocol and Declaration, but the Treaty of Lisbon now provides that if a group of Member States is close to forming a ‘blocking minority’, discussions must continue until a solution satisfying both parties is achieved within a reasonable period, whilst respecting any compulsory time limits set by Community law. A declaration annexed to the Treaty provides that the Council will take a decision concerning the application of the compromise and will indicate how it should be applied.

Between 1 November 2014 and 31 March 2017, a group of States will be deemed to constitute a blocking minority if it contains at least three quarters of the population or three quarters of the Member States necessary to constitute a blocking minority. As from 1 April 2017 (i.e. when a member State can no longer request the application of the rules under the Nice Treaty), these percentages will go down to 55 per cent. Furthermore a Protocol provides that such a Council decision may only be changed after authorisation by the European Council by common accord.

It should be noted that the new ‘Ioannina clause’ is only a political compromise based on qualitative judgments concerning a ‘satisfactory solution’ within a ‘reasonable period’ and should not be interpreted in strict legal terms. It is rather the expression of the wish for the Council to be able to continue its work. However, this shows again how important the ‘numbers game’ is in the eyes of the Member States. The Treaty of Lisbon adds another 39 areas for QMV.

COREPER

COREPER is a French acronym for the Committee of Permanent Representatives.
Clearly, ministers of the Member State governments are busy people. Much of the work
in the Council is done by the Committee of Permanent Representatives, COREPER. These
are permanently posted senior national officials appointed at ambassadorial rank, who
address the issues and negotiate on behalf of their governments. Most of the business of the Council is effectively dealt with at this level. Those matters that are satisfactorily agreed by these representatives are sent to the relevant Council meeting as an ‘A list’ meaning that they require no further discussion but can simply be agreed at the Council meeting. Items which require further discussion at ministerial level are set on the agenda for discussion as ‘B list’ items.
There are two levels, COREPER I and II. COREPER II is more senior, dealing with political and institutional matters, economic and financial affairs and external relations. COREPER I is composed of deputy permanent representatives who look at legislative proposals concerning the environment, social affairs, the internal market and transport. COREPER is assisted by 150–250 working groups at any time, some permanent, some temporary, made up of national experts who advise on the proposals put forward by the Commission.

a Explain the difference between a direct action and the preliminary reference procedure under Article 234 EC.
b List the different Treaty Articles which enable cases to be heard before the ECJ, stating which are direct actions.
c Explain the role of the Advocate General.

a Explain the difference between the Council of the EU and the European Council.
b Explain the composition and role of the European Council.
c Explain the significance of the Luxembourg Accords.
d Why does it matter whether voting is by qualified majority or unanimity?
e Explain how the developing role of the Council and the European Council has weakened the Commission’s role as the initiator of legislation.
f What is the role of the Court of Auditors?

Self-assessment questions

1 In regard to the European Parliament, state:
a when it became directly electable
b how many MEPs it has
c its primary functions.
2 In regard to the European Parliament, explain:
a how MEPs are organised and give the names of one or two of the main political
groupings
b how its powers in the legislative procedures of the European Community have
changed from the Treaty of Rome to the present day
c its role in the consultation procedure, including the significance of the Roquette
Frères decision.

Sample examination questions

Question 1 ‘Consecutive Treaties have enhanced the role of the European Parliament.’
Discuss.

Question 2 ‘The Community institutions have changed in their relationship to each other since the Treaty of Rome.’

Discuss with reference to two institutions of the European Community.

Advice on answering the questions

Question 1 This question requires consideration of the original position of the Parliament and an account of how its powers have been developed through Treaty amendment. If you can refer your account of the expansion of its powers to specified Treaty Articles, that will strengthen your answer. A first class answer might mention that it is the role of parliaments to legislate and to scrutinise the executive. Explain that while the Parliament was one of the four original Community institutions set up by the Treaty of Rome in 1957, it had very limited powers. It was a ‘talking shop’ with its members coming under a dual mandate as members of their national parliaments. Explain Parliament’s limited role in the legislative procedure under the consultation procedure and explain that even that amount of participation was only in limited areas of competence. You could mention that even at this point, though, the Parliament did have the power todismiss the Commission by a two-thirds majority under Article 201 EC. The first expansion of its powers was under the two Budgetary Treaties of 1970 and 1975, giving it an important role in the adoption of the budget. Then came the establishment of direct elections to the European Parliament which transformed its status making it the only Community institution with a clear democratic mandate.

You should refer to the problem of the ‘democratic deficit’ in the Community and explain that the enhancement of the Parliament’s role is seen as a way of addressing this problem. Describe the strengthening of the role of the Parliament by the introduction of new legislative procedures, co-operation (SEA), co-decision (TEU), the simplifying (ToA) and extending of Co-decision (ToA, ToN). Then address the other ways the Parliament’s role has been strengthened. This question refers to the ‘Treaties’ but even so, you should mention the changes to the Parliament’s
status under Article 230 EC introduced by TEU, adopting the wording of the case law of the ECJ. In a question which does not limit the question to changes brought about by the‘Treaties’ it is essential that you include a section on case law of the ECJ which has enhanced the position of the Parliament, especially ‘Les Verts’ and Parliament v Council (Chernobyl). Explain that since ToN the Parliament has full privileged status under Article 230 EC, like the Member States and other institutions. Mention the other important changes, in particular: development of the Parliament’s role in the appointment of the President of the Commission and the Commission itself; the addition of Committees of Inquiry, the right for citizens to petition the Parliament and the appointment of an Ombudsman by TEU. Also the right to request the Commission to legislate in a particular area and the increasing use of Parliamentary questions to the Commission and the Council. Under the proposed Lisbon Treaty, the President of the European Council would be obliged to report to the European Parliament after each of its meetings (Article 9 B(6)(d) of the Lisbon Treaty).

Summarise by saying that the role of the Parliament has been greatly strengthened since 1957; it is now a co-legislator with the Council and plays an increasing role in supervising the Commission. You could question the degree to which this does address the ‘democratic deficit’ given the low turn-out at European Parliamentary elections. This would be a first class answer! You will probably not have time to cover all these points.

Question 2

Explain that the powers and functions of the EC institutions were laid down in the original Treaty of Rome but there have since been amendments under successive treaties and you may want to mention that there have also been developments outside the scope of the treaties (for example, the Luxembourg Accords and the establishment of the European Council – if you are considering the Council of the EU). Take care to: identify which two institutions you are discussing give an overview of the functions of the two institutions you choose.

Be careful to answer the question.

Start with an introduction, setting out the functions of the two institutions (the Council is the main legislator for the Community; the Parliament has a legislative and supervisory role).

The European Parliament: legislative powers The main point here is that the European
Parliament has become a co-legislator with the Council. Under the scheme of the original Treaty of Rome, the European Parliament had no real legislative power; its sole power was to be consulted by the Council when so required by the Treaty. Even then, its opinion did not have to be accepted (see answer to Question 1 above). In 1957, the Council was the only legislator for the Community.

Then consider the increase in the power of the Parliament in the legislative procedures of the EC as described in Question 1 above, explaining that the implementation of direct elections to the Parliament in 1979 strengthened its democratic credibility. Mention the problem of the democratic deficit – that the Council is perceived as undemocratic and therefore it is important to strengthen the powers of the European Parliament. Also explain that the 1970 and 1975 Budgetary Treaties gave the Parliament significant powers in regard to the adoption of the budget, so it now acts with the Council in this important procedure.

The European Parliament: supervisory powers

Describe:

how the European Parliament increasingly asks oral and written questions of the Council, so its supervisory role in regard to the Council has been strengthened that is was given the power to set up committees of inquiry in the TEU that there is an Ombudsman appointed by the Parliament, whose role is to look into allegations of maladministration by the Community institutions (also established by TEU) that as the Parliament now has fully privileged status to bring actions for judicial review under Article 230 EC (see Chapter 8) it may now test the legality of acts of the other institutions in the courts that since 1989, the President of the Council is obliged to draw up and present to the Parliament his programme for the presidency The Council The Council’s powers have been limited by the requirement for co-decision with the Parliament in enacting legislation and adopting the budget. It no longer acts autonomously. It increasingly can be called to account by the Parliament through the mechanisms mentioned above including the possibility of judicial review actions brought by the Parliament with its fully privileged status under Article 230 EC.

Answers are set out below for each pair of institutions, except the Court. You should only answer in regard to one pair!

The voting procedures in the Council itself have changed from unanimity to qualified
majority voting which has streamlined decision-making at the expense of the influence of individual countries. Enlargement of the Community has meant that this was essential but qualified majority voting also implies a shift in power to the Commission and Parliament as qualified majority voting relies on alliances and compromises between Member States which can be affected by the other institutions.
ToA saw the implementation of requirements for greater transparency and openness in the Council’s decision-making procedures, and greater access to its documents. This process is likely to continue.

Conclusion

The balance of power between the Parliament and the Council has changed,
with a significant shift towards the influence and power of the Parliament and greater accountability of the Council to the Parliament. These changes reflect the attempt of the Community to address the democratic deficit. However, the Council remains the most important and dominant institution.

European Parliament/Commission

Introduction, setting out the powers and functions of the two institutions (Parliament as above). The Commission is the executive of the Community; it initiates all legislation; it enacts delegated legislation; it is the ‘guardian of the Treaties’ taking actions against Member States in breach of their Community law obligations (Article 226 EC) and against undertakings in breach of the rules on competition law.

The European Parliament: appointment and supervision of the Commission The European
Parliament was accorded the power to dismiss the Commission under Article 201 EC, by a two-thirds majority, in the original Treaty of Rome of 1957. It has subsequently been accorded other significant powers over the Commission. Originally the Parliament had no say in the appointment of the Commission but, since the ToA, the Member States nominate the person they wish to appoint as President of the Commission and this appointment is then subject to a vote of approval by the Parliament. Importantly, the European Parliament also votes on the appointment of the
Commission as a whole (these powers were added by the TEU) but it cannot veto individual Commissioners. This power was used in 2004. The Parliament, which objected to the appointment of a few individual Commissioners, threatened to vote against the appointment of the Commission as a whole, and the President of the Commission was obliged to withdraw his proposed team of Commissioners and change its membership. You could also mention that the threat of the use of the censure motion under Article 201 EC in 1999 forced the resignation of the Santer Commission. A vote was not actually taken, but after the report of a committee of inquiry that the parliament had set up was made public it became clear that a vote to oust the Commission might succeed and the Commission resigned.

These two recent events are very significant affirmations of the importance of the European Parliament in its supervisory role over the other institutions

The Commission must answer questions put to it by the Parliament, and these are increasing dramatically in number.

The European Parliament: legislative powers Since the TEU, the European Parliament
has the right under Article 192 EC to submit a proposal where it thinks legislative action is necessary, although the Commission does not have to act. However, under a Framework Agreement between the two institutions signed in 2000, the Commission has pledged itself to undertake ‘a prompt and sufficiently detailed response’ to such a proposal for legislation.

The European Parliament’s increasing powers as listed above in the adoption of the budget and the legislative procedure have strengthened its importance. The Commission has to take notice of the European Parliament’s views on legislation especially where, as under the co-decision procedure, the European Parliament has the power to veto a legislative proposal.

The Commission The Member States have had their powers of appointment of the
Commission, which were originally absolute, subjected to increasing scrutiny and requirement for approval by the Parliament, as detailed above. The Commission, in its executive role, is also increasingly being called to account for the way it carries out its tasks by the Parliament. This is through increased numbers of parliamentary questions and the use of the powers of appointment/dismissal.

The role of the Commission as the only initiator of legislation has been affected by the granting of powers to the Parliament to ask for legislation to be drafted, although the Commission is not bound to follow this through.

Conclude that the powers of the Parliament in regard to the supervision of the Commission have increased and that its use of these powers has enhanced its status.
So, again, in this relationship between the Parliament and another Community institution, there has been a marked shift in the balance of power towards the Parliament. EU law 3 The institutions of the European Community page 65
Council/Commission Explain the functions of the two institutions (see above). The relationship between them revolves round their relative importance in regard to legislative procedures and legislative initiative, and in setting the agenda for the Community as a whole. Originally, in 1957, it was envisaged that the Commission should play the central role in the development of the Community. It had the sole right of legislative initiative and also set the legislative programme. It therefore was perceived as the institution which shaped the development of the Community. An important element in the power of the Commission in the original Treaty (and still in force today) was the requirement for unanimity in the Council to amend a Commission proposal. As we have seen, unanimity is not easy to achieve and this
prevents the Council ‘tinkering with’ or easily amending Commission proposals. However, a number of developments have affected this central position of the Commission, and interestingly, some of these are outside the formal structures of the Treaties. The Luxembourg Accords Luxembourg Accords of 1966 were a non-legal agreement (they were never legislated or put into a Treaty) that where a Member State believed that their vital national interests were affected by the legislative proposal, voting was to be by unanimity, thus preserving the national veto. This weakened the Commission’s position as any legislation which it wanted to get through had to be approved by all members of the Council. On the other hand, the Commission has more power in the legislative procedure where qualified majority voting is used, because it can broker deals and create compromises, so the subsequent shift with
each new Treaty towards more QMV has increased the Commission’s power in negotiations on legislative proposals.

Initiation of legislation The Council has strengthened its position as regards initiation of legislation, one of the most important powers of the Commission, by an increased use of Article 208 EC which permits the Council to make proposals for legislation. Unlike the initiatives of the European Parliament, which might not be implemented, the Commission does have to take these proposals seriously. The wording of the Treaty Article suggests that the proposals should be in general terms but, in practice, the Council may put forward specific proposals and has increasingly done so. Shaping of the agenda for the Community The development of the position of the
European Council has undermined the position of the Commission as the central institution in determining the future constitutional and institutional arrangements for the Community.

State clearly what the European Council is – its composition. The European Council has become the most important body of the Community (and the European Union as a whole) formulating high-level policy for the Community and instigating initiatives such as EMU or the Social Chapter. It takes the initiative in convening intergovernmental Conferences (IGCs) to draw up new Treaties. This development, which means that the Member States have taken back control of the Community agenda from the Commission, has happened largely outside the formal structure of the Treaties. The Council has therefore increased its dominance in the Community by keeping control of the overall agenda through the European Council. The European Council has now gained institutional status under the Lisbon Treaty.

The Council’s control over delegated legislation The Commission enacts legislation
delegated to it by the Council, but the Council has increased its powers of scrutiny over this process by setting up Comitology – the system of committees of Council appointees who monitor and supervise the enacting of delegated legislation by the Commission. The European Council was mentioned for the first time briefly in the SEA and its position is set out in Article 4 TEU.

You could also mention that under the second and third pillars of the EU, the Council
and European Council have the leading role; these pillars are inter-governmental and the Commission loses its exclusive power of initiative (any Member State may also put forward a proposal for legislative action) and is merely to be ‘fully associated’ with decisions taken.

Conclude that the development of the Community has seen the Council take a more leading role than that envisaged in the original Treaty, and this has been at the expense of the Commission’s position as the central Community institution.

Sources of Community law, legislative acts and procedures

Main sources of law#

The sources of Community law are:

the Treaties (primary legislation) secondary legislation enacted by the institutions
the case law of the ECJ and the CFI general principles of law recognised by the European Court of Justice international agreements with non-Member States (third countries). The Treaties (primary legislation) The Treaties (primary legislation) include:the ECSC Treaty (expired in 2002) the EC Treaty the Euratom Treaty; the Merger Treaty (Convention Establishing a Single Council and a Single Commission of the European Communities)the first and second Budgetary Treaties; the various Treaties of Accession (see Chapter 2; the Single European Act;the Treaty on European Union; the Treaty of Amsterdam; the Treaty of Nice; the Treaty of Lisbon (not yet ratified); Conventions concluded pursuant to Article 293 (ex 220) EC.

Secondary legislation
Article 249 EC [Article 189] sets out the secondary legislation of the European Community.

The EC Treaty defines three types of legally binding Acts (Regulations, Directives and Decisions) and two types of Acts that are not legally binding (Recommendations and Opinions). Although Opinions and Recommendations are not legally binding, they are persuasive. They can be used as an aid to interpretation by the ECJ and as such must be taken into account by the national courts.

Regulations

Regulations are directly applicable.† This means that they apply directly in the legal systems of the Member States when legislated by the EC, without further incorporation in national legislation. This makes them the most powerful form of secondary legislation and they are used when there is a requirement for exact uniformity.

Note that under the terms of Article 249 EC only Regulations are directly applicable. Treaty Articles are not directly applicable. They may be directly effective if they fulfil the van Gend criteria.

It is important that you nderstand and can define the meaning of ‘directly applicable’. he ECJ has held that Regulations should not be subject to further incorporation in national legislation by Member States. See: Case 39/72 Commission v Italy (Re Slaughtered Cows) [1973] ECR 101; Case 34/73 Variola v Italian Finance Administration [1973] ECR 981; Case 31/78 Bussone v Italian Ministry for Agriculture [1978] ECR 2429; Case 92/78 Simmenthal SpA v Commission [1979] ECR 777. This is because the Community nature of the Regulations as part of Community law should not be disguised. This will make it apparent to those who are affected by it that it is subject to preliminary rulings on its interpretation and validity by the ECJ. Regulations will also generally have direct effect (see further Chapter 6).
Directives Directives, on the other hand, must be incorporated (or ‘implemented’) in national legislation in order to have legal effect in the Member States. They set out objectives to be achieved, but leave discretion to the Member States as to the form and method for achieving these objectives. Member States are required to do so by a time limit, which is either specified in the Directive itself, or on the twentieth day after publication in the Official Journal.

There is a problem because Member States frequently fail to implement Directives within the allocated time period. This has an effect on the uniformity of Community law and may also deprive individuals in the defaulting Member States of their Community law rights. In order to address the problem of unimplemented or wrongly implemented Directives, the ECJ extended the principle of direct effect (see 26/62 van Gend en Loos [1963] ECR 1, ) to unimplemented Directives (Case 41/74 van Duyn v Home Office [1974] ECR 1337) which were clear and precise, unconditional and had passed their date of implementation (Case 148/78 Pubblico Ministero v Tullio Ratti [1979] ECR 1629). However, the direct effect of an unimplemented Directive is limited to use against the state (Case 152/84 Marshall v Southampton and South-West Hampshire Area Health Authority [1986] ECR 723) or an emanation of the state (Case
188/89 Foster v British Gas [1990] ECR 1-3313).

There are few acceptable justifications for a Member State’s failure to transpose Directives.

he fact that a Directive may have direct effect, that is, that it may be invoked by an individual in a national court, does not excuse a Member State from transposition.
Decisions Decisions are the third form of binding secondary legislation. They are often addressed to one or more Member State or to a single undertaking, particularly in competition proceedings where the ‘Decision’ of the Commission that an undertaking is in breach of Articles 81 or 82 EC is a piece of secondary Legislation, approved by the College of Commissioners. It is therefore subject to judicial review (proceedings (see Chapter 9). It should be noted that the ECJ has held that the title of an Act does not necessarily determine its legal classification. The Court will look to substance rather than form. In Joined
Cases 41–44/70 International Fruit v Commission [1971] ECR 411 a piece of legislation that had been enacted as a ‘Regulation’ was held by the Court to be, in fact, ‘a bundle of decisions’.

Other Acts

The Article 249 EC list is not exhaustive. The ECJ has recognised other types of legally binding Acts. In addition to the Article 249 EC Acts, the Community institutions employ a variety of other Acts, such as Notices and Resolutions, which are usually persuasive rather than legally binding. These are sometimes referred to as acts sui generis, of their own particular kind, which can be binding under certain conditions. The ECJ has held, for example, that certain Acts of the European Parliament, though not mentioned in Article 249 EC (ex 189), bind third parties and because they have ‘legal effects vis-à-vis third parties’ are, therefore,
judicially reviewable: Case 294/83 Les Verts v EP [1986] ECR 1339. As a result of this case the first paragraph of Article 230 EC was amended to read: ‘and of acts of the European Parliament intended to produce legal effects vis-à-vis third parties. In Case 22/70 Commission v Council (ERTA) [1971] ECR 263 a Council resolution was held by the ECJ to have legal effect. Go to yourstudy pack and read the extracts from Case 249/83 Parti écologiste ‘Les Verts’ v European Parliament
and Case 22/70 Commission of the European Communities v Council of the European
Communities (European Agreement of Road Transport). Take notes on their
significance.

EU law 4 Sources of Community law, legislative acts and procedures page 73
Case law of the ECJ and the CFI. The case law of the European Courts is an important source of law. There is no doctrine of precedent in the ECJ as there is in the English courts. However, preliminary rulings of the ECJ must be followed by the national courts under the doctrine of supremacy (see Chapter 6) and the ECJ generally follows its own case law, referring to its own ‘consistent case law’.
If it intends to reverse a previous ruling, it will usually announce very clearly that it is doing so. The Treaty of Rome was a ‘traité cadre’ – a framework treaty – and it was always envisaged that it would be completed not only by secondary legislation but also by case law of the ECJ.

General principles of law recognised by the European Court of Justice
See further Chapter 5.
International agreements with non-member states (third countries) Agreements with third countries are applied by the European Court as an integral part of Community law. They include the following. Agreements between the Community and one or more third countries. An example is the WTO agreement. So-called ‘mixed agreements’ between the Community and its Member States acting jointly, on the one hand, and between the Community and third countries, on the other hand. An example is the Lomé conventions between the EC and the African, Caribbean and Pacific (ACP) countries.
Although the Commission has the power to initiate legislation, the Council is the main legislative body of the Community. The legislative procedure that applies in any area of European Community competence is set out in the relevant Treaty Article. Under the original Treaty of Rome, the European Parliament’s only power in the legislative procedure was to be consulted when legislation was enacted in limited areas of the Treaty. However, its powers of participation in the legislative process have been greatly increased by the introduction of two new legislative procedures:
the co-operation procedure (introduced in the Single European Act) the co-decision procedure (introduced in the Maastricht Treaty on European Union, and simplified and expanded in scope by the Treaty of Amsterdam).

The Commission also has limited powers to legislate on its own and it enacts delegated legislation under powers conferred by the Council. This delegated legislation accounts for the greatest volume of EC legislation. It is subject to scrutiny by representatives of the Council under the Comitology procedures. Many different legislative procedures are formalised within the Treaty of Rome and the Treaty on European Union. What follows is an account of the most frequently used procedures in which: the Council is legislator/Council and Parliament act together to legislate the Commission is legislator.

The Council as legislator
With regard to the Council or Council/Parliament as legislator you need to know about five types of procedure:

the Council acts alone
the consultation procedure
the co-operation procedure (Article 252 EC)
the co-decision procedure (Article 251 EC)
the assent procedure.

Voting requirements
Remember from Chapter 3 that there are different possible voting requirements in the
Council. The basic forms are:

simple majority voting (very rarely used)
qualified majority voting, see Chapter 3
unanimity.

Qualified majority voting is now the most commonly used form of decision making in the Council.

The Council acts alone

The Council acts alone in a number of areas where it can still legislate on a proposal from the Commission without consulting the European Parliament. Examples are:

Article 26 EC on the common customs tariff
Articles 57, 60 EC on free movement of capital
Article 133 (1-4) EC on the common commercial policy.
EU law 4 Sources of Community law, legislative acts and procedures page 75

The consultation procedure

In the consultation procedure, the Council has to consult the Parliament, but it is not obliged to act on its opinion or to give reasons for failing to do so. This procedure usually goes together with unanimous voting in the Council. The ECJ has held that failure to wait for the Parliament’s opinion before legislating renders the Act void. In a later case, however, the ECJ held that if the matter is urgent and the Parliament fails to gives its opinion in reasonable time, the Council may legislate without waiting for its opinion.

Examples of areas where the consultation procedure is used include:

Article 37 EC Agriculture, visas, asylum and immigration legislation under Title IV [Title IIIa]
Article 93 EC Indirect taxation
Article 89 EC State aids
Article 13 EC Discrimination, employment policy, commercial relations with third countries.

Mostly under the second pillar (CFSP):
Article 308 EC – the residual right to legislate where there is not an appropriate legal base provided elsewhere in the Treaty.

The co-operation procedure (Article 252 EC)
The co-operation procedure was introduced by the SEA and reflected Parliament’s
enhanced status after the introduction of direct elections in 1979. This procedure gave the Parliament two readings, and if the Parliament rejected the Council’s proposal, the measure could only be passed by a unanimous vote in the Council. The Treaty of Amsterdam replaced the co-operation procedure with co-decision, except in regard to Economic and Monetary Union.

The co-decision procedure (Article 251 EC)

The co-decision procedure was introduced by the Treaty on European Union and gave the
Parliament the power to veto legislation. An outline of the procedure is as follows. The Commission submits a proposal to the EP (first reading) and the Council. The EP gives an opinion, which can contain proposed amendments. If the Council approves all the proposed amendments, or if there are no amendments, it can then decide by QMV to adopt the Act. If the Council does not like the EP’s amendments or wishes to adopt others, it adopts ‘a common position’. The Council submits its common position to Parliament, with its reasons for this position, and the Commission must also convey its position to the Parliament. The ‘common position’ replaces the Commission’s proposal as the text that is to be considered.

The EP now has its second reading. At this point, the Parliament can approve the measure(in which case it is legislated) or veto the measure, in which case it is rejected and falls.If, instead, the Parliament proposes amendments to the common position, they are sent to the Council with the Commission’s opinion. The Council can approve the amendments in which case the legislation is passed. This is by
QMV or by unanimity if the Commission gives a negative opinion. If the Council rejects the amendments, a Conciliation Committee is convened. This committee
is composed of 27 representatives from the Council – one from each Member State
– and 27 MEPs. The Commission is represented at the meetings of the Committee and attempts to reconcile the positions of the Council and the Parliament. The Committee has six weeks to try to reach agreement on a text. If it does approve the text, that is then legislated by the Parliament, acting by an absolute majority of its members, and by the Council, acting by a qualified majority.

The original co-decision procedure in the Treaty on European Union was very complex, and it was significantly simplified by the Treaty of Amsterdam. The account above describes the simplified procedure. The ToA also extended the areas to which the co-decision procedure applies, replacing the co-operation procedure in all areas except EMU. Under the co-decision procedure, the Parliament has much enhanced its position of a co-legislator with the Council. The ToN extended its use further and the Treaty of Lisbon makes further additions.

The co-decision procedure applies in a number of areas and, after ratification of the Lisbon Treaty, it will become the usual legislative procedure. Examples of areas where the co-decision procedure applies are:

Article 40 EC Free movement of Workers
Article 44 EC Directives on Freedom of Establishment
Article 95 EC Internal market
Article 174 EC Environment

Amendment of the Commission’s proposal by the Council
Where the Council acts on a proposal from the Commission (as it usually does), unanimity in the Council is required to amend the Commission’s proposal.
Assent procedure The assent procedure was introduced in SEA. The Council acts after receiving the assent of the EP and legislation can only be passed if they both agree. It applies in a limited number of areas including:

Article 49 TEU: concerning membership of the European Union
Article 105 (6) EC: on the functioning of the European Central Bank
Article 161 EC: on certain measures on social and economic cohesion.

With regard to the Commission as legislator, there are two types of procedure.
In a very limited number of areas, the Commission has an original power to legislate. Here, the Commission has the power to adopt legislation without intervention from any other institution. The relevant areas include:

Article 86(3) EC on the role of the state in relation to public undertakings
Article 39 (3)d EC on rights of workers to remain after having been employed in a Member State

The Commission has power to enact delegated legislation under Article 202 EC, which
authorises the Council to delegate powers to enact legislation to the Commission. Delegated legislation accounts for the greatest proportion of the legislation passed by the EC each year. ‘Comitology’

You may recall the problems with delegated legislation from your Public law course. With delegated legislation, the legislature gives competence to enact delegated legislation to the executive, and there can be problems with scrutiny and control of this delegated legislation. In the Community legal order, a very large percentage of the legislation passed (in terms of volume, not in significance) is legislation enacted by the Commission under powers delegated from the Council.

The Council was not prepared to simply hand over this competence to the Commission,
but wished to have some control over the delegated legislation. There are particular
problems in the enactment of delegated legislation in the Community legal order because the Commission tends to take a more integrationist approach than the Member States.

Different Member States may also have a different view of what the legislation is intended to achieve. The Council therefore established a system of committees made up of representatives of the Member States to oversee the enactment of delegated legislation by the Commission.

This system of committees is called ‘Comitology’. Because there was no express authorityin the Treaty for these committees, there was a challenge to their legality. Although the ECJ upheld the legal validity of the system (Case 25/70 Köster [1970] ECR 1161), Article 202 EC was subsequently amended by the SEA to provide a secure foundation for the control of delegated legislation by the committees. This provided a legal base for the adoption of a framework Decision (Decision 87/373), which established the procedures to be followed by the Comitology committees. The European Parliament was unhappy with its exclusion from the Comitology process. In two cases: Case 302/87 European Parliament v Council [1988]
ECR 5615, the ‘Comitology’ case, and Case 70/88 European Parliament v Council (re Chernobyl) [1990] ECR I-2041 (in the first case unsuccessfully, in the second case successfully), the European Parliament asserted its right to bring a case against the Council for its lack of involvement in the decision-making process. (See Chapter 9 for further details). Decision 87/373 was amended by Decision 1999/468, which, firstly, clarified which types of procedure should be used for which areas of lawmaking and, secondly, increased the role of the Parliament. It also ensured greater transparency in the Comitology process. The committees in all the three procedures described below are made up of Member State representatives and are chaired by a (non-voting) member of the Commission. Three types of procedure exist:
The advisory procedure The committee delivers an opinion on the Commission’s proposed measure. Although the Commission shall take ‘utmost account’ of the opinion, it is not bound by it. The management procedure. The Commission’s proposal is given to the committee which delivers its opinion. If the committee does not agree with the Commission’s proposed legislation, the Commission must inform the Council. The Commission may then defer implementation of the measure for three months. During this period the Council may, acting by QMV, decide to enact a
different piece of legislation.

The regulatory procedure

This procedure gives most power to the committee. The committee must approve the proposal; if it does not or if it fails to give an opinion, the proposed measure is referred back to the Council and the European Parliament for further scrutiny.
Requirement to state reasons for legislation: Article 253 EC All legislation requires the reasons on which it is based to be stated and the breach of this
requirement – or any other procedural requirement – will be grounds for the ECJ to declare the legislation void if an action for judicial review is brought. The duty to state reasons includes a reference to the legal basis of the Act – this is the relevant Treaty Article, which gives the competence to act in any particular area. The legal basis is important because it identifies the proper legislative procedure – giving a greater or lesser role to the Parliament depending on which legislative procedure is used. The Parliament will wish to challenge the legality of an act when it believes that the legal base which has been used is incorrect and gives it a lesser role than the correct one. Similarly, a Member State may wish to challenge
a piece of legislation enacted by QMV on the grounds that the incorrect Treaty Article has been used and the legislation should have required unanimity. Increasing attention is now paid to procedural requirements. Particularly serious and manifest procedural deficiencies may render a putative Act non-existent in law. See Joined Cases T79/89 et al., BASF AG and Others v Commission [1992] ECR II-315; Case C-137/92P Commission v BASF [1994] ECR I-2555. See, for example: Case 45/86
Commission v Council (Tariff Preferences) [1987] ECR 1493; Case C-300/89 Commission
v Council (Titanium Dioxide) [1991] ECR I-2867; Case C-155/91
Commission v Council (Waste Directive) [1993] ECR I-939; Case C-84/94 UK v Council
(Working time directive) [1996] ECR 1-5759.

The principles of subsidiarity and proportionality Article 5 EC

The principles of subsidiarity and proportionality were added to the European Community legal order by the TEU and are contained in Article 5 EC. They only apply in areas of shared competence, not in areas where the Community has exclusive competence. The first paragraph of Article 5 EC confirms that the Community must act within the limits of its competence. The second paragraph sets out the principle of subsidiarity. This states that the Community should act only if: the objectives cannot be sufficiently achieved by the Member States, and action can be better achieved by the Community for reasons of scale or efficiency. The principle of subsidiarity in general states that decisions should be taken at the lowest
level possible, as close to the individual as possible. In the Treaty it refers to the relationship between the Member States and the EC and states that, in areas of shared competence, decisions should be taken at the Member State level except where the objectives of the action cannot be sufficiently achieved by action by the Member States and therefore for reasons of scale or efficiency should be dealt with at a Community level. This principle has to be taken into account by the Commission when proposing legislation: it has to justify all proposed legislation with reference to subsidiarity. There has been a reduction in the volume of legislation proposed by the Commission since subsidiarity came into effect which could be a result to its review of proposals with regard to the principle.

The third paragraph of Article 5 EC sets out the principle of proportionality stating that: ‘action by the Community should not go beyond what is necessary to achieve the objectives of the Treaty’. The principle of proportionality is a general principle of Community law,and it finds expression in, for example, the exercise of the derogations to the fundamental freedoms.

The meaning and implications of subsidiarity are clarified in the Protocol on the
Application of the Principles of subsidiarity and Proportionality appended to the Treaty of Amsterdam. The Protocol specifically states that legislation can be reviewed for conformity with the principle. The EP and the Council must also examine proposals and their own legislative amendments in the light of the principle. The Lisbon Treaty now also includes a subsidiarity check by national parliaments who can
issue a ‘yellow card’ if they think the principle has not been complied with.

Advice on answering the question

This question is a variation of the questions on the changing status of the European
Parliament discussed in Chapter 3. It requires: an account of the status of the European Parliament in 1957 under the original Treaty of Rome when it was just a ‘talking shop’ and had only 78 members who were delegates from the national parliaments. Its only power in the legislative procedure was to be consulted when the ‘consultation procedure’ was required under the Treaty. The Council did not have to take its opinion into account or give reasons for rejecting it, although it did have to wait to receive the Parliament’s opinion (Roquette Frères). The Budgetary Treaties of 1970 and 1975 gave the Parliament an important role in the adoption
of the Community budget and in 1979 its position as the only democratic institution in the Community legal order was confirmed by the establishment of direct elections.
The 1986 SEA introduced the co-operation procedure, giving the Parliament two readings of legislation and requiring unanimity in the Council to pass a measure when it had been rejected by the Parliament. This was an important step in the development of the status of the Parliament, although the co-operation procedure only applied in certain areas of the Treaty.The Assent procedure was also introduced by the SEA, giving the Parliament a veto in restricted but significant areas such as the accession of new Member States and the signing of Association Agreements. With the TEU the Parliament became a co-legislator with the Council, at last gaining the right to veto legislation. This procedure was simplified, in a way that strengthened the Parliament’s position, by the ToA which also greatly extended its use, including replacing the co-operation procedure by co-decision except in regard to EMU. Mention should be made of the Conciliation Committee as part of the co-decision Procedure. The essay should conclude by saying that the ToN expanded the use of the co-decision procedure so that the European Parliament is now involved as a co-legislator in most of the important decision-making. It is important to explain that the strengthening of the Parliament’s powers is a way of addressing the democratic deficit at the heart of the Community’s constitutional arrangements.

EU LAW - 2008 EXAMINER'S REPORT

2009-11-05T07:05:00.000-08:00

Question 1
Describe the development of at least two of the European Union’s institutions and consider how they could be enhanced or diminished for a more efficient functioning of the European Union.

This question asked for a discussion of two out of the five present institutions of the European Union. Almost all students discussed the European Parliament and its relations with the Council. A smaller, but still appreciable, number discussed the Commission and some discussed the European Court of Justice (ECJ). There was some good discussion of the respective roles of these institutions (nobody addressed the role of the Court of Auditors). Some answers still mentioned the European Council, composed of heads of state or government, which is not an institution. The main points to be addressed in the relationship between the Council and the Parliament
are as follows.

Legislative procedures: consultation, co-operation, co-decision, assent and the change through consecutive Treaties from consultation (originally), through co-operation (SEA) to co-decision (now the most commonly used procedure). A short description of the procedure was required (not a repetition of the procedures described in Articles 251 and 252 EC). The procedure for approval of the budget was described by many students. Although important, again this procedure should be
described by briefly mentioning the salient points. The increasing involvement of the Parliament in the legislative and budgetary process should be mentioned. As regards voting in the Council, the change from unanimous voting to qualified majority voting should be described.

The European Parliament’s role is the one which has probably changed most over the years. In addition to the points noted above, the Parliament’s standing before the ECJ is an important point to mention, from total absence of standing, to involvement via the Roquette case, to increased standing via les Verts, Comitology and chernobyl, reflected in respective Treaty amendments, to full standing under Article 230.Additional points to include: election procedure, parliamentarycommissioner (Ombudsman), petitions.

The Commission: The Commission’s role as guardian of the Treaties and initiator of legislation. Its powers to legislate, both primary and delegated by the Council. The powers to take Member States before the ECJ for breach of Community law. Acting for the Community where the Community has exclusive competence, both internally and in
external relations. Exercising powers in the field of competition and state aid.
Discussion of the role of the ECJ should include its jurisdiction in direct actions (Articles 226, 227, 228, 230, 232, 243) and indirectly through preliminary rulings under Article 234.

Many answers ignored the request to consider enhancement or diminution of powers of the institutions. This was a pity as good answers which did deal with this showed the student’s understanding of the relationship between the institutions and ways of improving effectiveness.

Question 2
Trace the development of the doctrine of direct effect from its inception in the case law of the European Court of Justice, with reference to primary and secondary Community legislation and to international agreements, and explain the extent of its contributions to Community Law and the development of the rights of the individual.

This question asked for a consideration of the principle of direct effect and its development. The answer should start with van Gend en Loos,which first established the principle for Treaty Articles repeated in cases like Costa v ENEL (also establishing supremacy). This should be followed by direct effect of Regulations, Decisions, international agreements (ignored by many students) and, most importantly,
Directives. This should include a discussion of horizontal and vertical direct effect, and its shortcomings, leading to alternative solutions looked for by the ECJ: indirect effect, incidental direct effect and, most importantly, state liability for breach of Community Law (see Francovich).

Question 3
Pavel, from the Czech Republic, decides to go and visit the UK after having completed his studies and professional qualification as a dentist in Prague. He is accompanied by Anya, his Ukranian long-time partner. They decide to go to Manchester where they have heard there is a shortage of dentists. Pavel soon finds a dental practice which he joins as a partner. Anya opens a little gift shop where she sells Ukranian arts and crafts. Pavel is suspended from the practice after four months then he is accused of malpractice. Although the complaint is withdrawn, Pavel’s partners ask him to leave, as they feel that this episode has shown that the cultural differences between them are too great. Pavel has not succeeded, three months later, in finding another practice which will take him. He is given leave to stay for a further six months by the authorities, but Anya is served with an order to leave, as she is no longer living with Pavel. Anya and Pavel both consult you and ask if they have any remedies under European law and, if so, how they should proceed. In your response, deal with EU legislation and case law on the free movement of persons and its limitations.

Question 3 was concerned with the free movement of persons and discrimination. Pavel joins a dental partnership. Is he self-employed or a worker? The best answers ddressed this. Although a partnership in principle consists of self-employed partners, it seems fairly clear that Pavel is employed, as he is effectively dismissed from the practice. Since the introduction of Directive 2004/38 many of the rights apply to establishment as well as to workers. Pavel has the right to remain to look for a job (Antonissen). As regards the dental practice, Pavel may
well have a case against them if he has been discriminated against on grounds of nationality. The cultural differences argument does appear to be thinly disguised discrimination as to nationality. Treaty Article 12 is horizontally directly effective and Pavel could therefore directly rely on this in the national court. This has nothing to do with ethnicity discrimination, which is covered by Directive 2000/43 and which would, in any case, require a vertical relationship. The dental practice would have to prove it has not been discriminatory. Anya’s position depends on that of Pavel, an EU citizen (she is not). Directive 2004/38 in Article 3(2)(b), provides for the possibility for long-term partners to be treated as spouse or as someone in civil partnership. However, they are separated. The only case law to support Anya’s position is that of Diatta, but this concerned a married couple
who had separated. Her self-employment in her gift shop probably cannot save her. Pavel is not only allowed to stay, he has a good case for suing the dental practice for discrimination as to nationality.

Question 4
Janos, a Hungarian citizen, buys a statue of a warrior at a local market on a visit to Romania. He intends to take this back to Hungary as a companion piece to a statue he bought in Romania six years ago.

Advise Janos as to the legality in EU law of the following actions and as to
the remedies available to him.

a) Customs stop Janos in Romania on a road leading to the border and tell him that, as the statue is a national treasure, he has to pay a substantial charge to be allowed to take it home to Hungary.

b) When Janos enters Hungary, he is stopped again and officials tell him that, in order to protect Hungarian trade in similar artefacts, he has to pay a percentage of the original purchase price into a fund for the protection of national treasures.

c) The new statue is rather less modest than the one Janos already possesses and sexual organs are exposed to view. Janos decides to exhibit the companion statues at an ‘exhibition of national examples of depraved art’ which has been approved and licensed by the Hungarian Ministry of Culture. Government inspectors see Janos’s exhibit, which proudly proclaims its Romanian origins, and confiscate both statues. They tell him that the exhibition has been mounted to show examples of depraved morality and to deter the people from manufacturing or buying such artefacts. Janos should never have been allowed to import the statues.

This question caused difficulty as the last paragraph (c) was missing a sentence, which was supplied later in most centres. The question could not be understood without the missing sentence. Answers were, therefore, judged on (a) and (b) only, where relevant. The question concerned fiscal charges (a and b) and then obstacles to the free movement of goods (c).

Part (a) concerns what is probably an export charge. These charges are generally prohibited under Article 25. Under Article 30 Member States are allowed to prohibit exports of national treasure, but if they permit exportation they cannot make it subject to a charge. (Commission v Italy; Art Treasures).

Part (b) concerns either an import duty (totally prohibited irrespective of the reason for it – see Diamantarbeiders) or arguably an internal tax under Article 90. In either case, the tax is illegal as it is clearly discriminatory (Article 90) and the prohibition is absolute under Article 23 (except for some very limited exceptions, none of which apply here).

Part (c) concerns obstacles to the free movement of goods under Article 28, with possible exceptions under Article 30, or under Cassis in the case of indistinctly applicable measures. The statue is confiscated on grounds of morality. Both statues are from another Member State. The question is: are Hungarian artefacts of the same type confiscated? If not, there is direct discrimination, which could only be justified under Article 30. If such statues are accepted if they are Hungarian and the offence therefore appears to be in the importation of the statue, the Hungarian authorities have no right to do this (Conegate in contrast to Henn and Darby). In any case, the exhibition is mounted precisely to ’show examples of depraved morality’ so that confiscation appears to be a bizarre reaction and discrimination seems to be the obvious reason.

Question 5
There are a number of ways in which individuals may be able to rely on European Union law in order to enforce their rights, through either the Commission or the Court of Justice. Consider each of these in turn, including their advantages and drawbacks.

This question asked for an analysis of direct actions entertained by the ECJ under Articles 226 and 228 (Commission against Member States), and Article 230(4) and indirect actions through preliminary rulings under Article 234. The best answers dealt with each of the actions in turn, the Commission procedure under Article 226, from letter to reasoned opinion to action before the ECJ, and the possibilities open under Article 228 if the judgment is not complied with by a Member State. Article 230(4) concerns the limited possibility for direct action by an individual, with consideration of limited standing under Plaumann, etc,and proposals for wider consideration in Jégo-Quéré and UPA. Preliminary rulings should consider Article 234, what is a court or tribunal, when rulings should be made and cases such as CILFIT. The possibility for individuals to obtain satisfaction in their national court,
under the twin principles of direct effect and supremacy, should also
be considered.

Credit was given to answers which contained some or most of the above elements. Quite a few answers simply took the opportunity to write what they knew about totally different parts of Community law,for example supremacy, or to repeat to a great extent, or sometimes even completely, the answer already given to question 2. Little credit was given to such answers by Examiners.

Question 6
Chloros, a Greek company, is a major manufacturer of chlorine-based products, which it sells around the world to be used in swimming pools. It operates in twelve member states, where it has market shares ranging from 60% in Slovenia to 10% in Greece, with an EU average share of 50%. In the UK the company has a market share of 35%, which has risen from 25% two years ago. Chloros sells a chlorine-based gel called Aquaclear, which is probably the most effective product on the market for cleaning pools. Aquaclear is expensive and difficult to manufacture, and Chloros has had to
invest heavily in special equipment. With the development of global warming, more firms are entering the market in more northern regions. Vattenchlor, a new Swedish company, has bought some of Chloros’s older equipment, which is still perfectly useable,on the open market. and has started aggressively to market Aquadream, a
clear gel very similar to Aquaclear. This gel is sold more cheaply than the Chloros Aquaclear product. Chloros has been told by one of its faithful customers that a British company called Bellapiscina, which is experiencing a booming demand for swimming pool equipment, has been buying large supplies of Aquadream from attenchlor. As a result, Chloros refuse to sell any more Aquaclear to Bellapiscina, who are greatly affected by this as Vattenchlor cannot supply their customers quickly enough to fulfil their demand. Chloros warn their other customers that they must not try to buy from Vattenchlor, or, indeed, sell any of their Aquaclear products to Bellapiscina. Chloros is convinced that Vattenchlor must be selling their product Aquadream at a loss, and that this will have a disastrous effect in terms of price on the swimming pool maintenance products market.

Consider whether Chloros has breached Article 82 EC and what might be the consequences of such a breach.

This question concerns the application of Article 82 on Competition
law.

Although most answers dealt with Article 82, some still thought that Article 81 was involved, in spite of the clear reference to Article 82 in the question. The first point is to ask whether Chloros is dominant. Discussion should look at the relevant geographic and product market dominance and substitutability. Case law should be applied to both elements and the principal cases include United Brands, Continental Can, Michelin, Commercial Solvents and many others.

The next element concerns abuse of the dominance. Factors are: refusal to supply, barriers to entry, a substantial part of the Common Market. Abuse includes such factors as exploitative behaviour, anticompetitive and/or exclusionary abuse.
There is no question of either exemptions or de minimis, which only apply to Article 81.

Question 7
“The principle of non-discrimination or equal treatment in the European Union has developed from modest origins in certain categories to a general principle applicable to all forms of discrimination now covered by EU law.”

Discuss with reference to both primary and secondary legislation and to ECJ
case law.

This question concerned the development of a possible general principle of non-discrimination. Good answers started by indicating the start of the development,
originally concerning only discrimination in respect of nationality (Article 12 EC) and concerning equal pay for men and women (Article 141). The development then progressed, at first mainly through case law. Article 12 started to have direct effect and Article 141 expanded into general sex discrimination in all areas with an economic element. Case law, a number of Directives and an addition to Article 141
widened the scope. The Treaty of Amsterdam then added Article 13, an enabling Article only, expanding into many other areas. This Article has given rise to a number of Directives and case law. In Mangold v Helm the ECJ ruled on age discrimination under Directive 2000/78 and set this in the context of the existence of a general principle of equality (non-discrimination). Too many answers
concentrated (almost) solely on sex discrimination and discussed the abundant legislation and case law. Good answers needed the additional discussion in order to properly answer the question.

Question 8
Museum visits in the national museum of Lithuania in Vilnius, as well as in some regional museums in other Lithuanian towns, have fallen away disastrously since the country joined the EU in 2004. Many young people, previously a category of regular visitors, have moved away, or have gone for temporary visits, to countries of the ‘old’ European Union. People now have significantly greater access to all EU television channels. Fictitious Directive 2006/205 provides in its preamble that European culture in all its forms should be promoted and thus be accessible to all EU citizens, The implementation date was 1 January 2008. Article 2 of the Directive
provides that access to museums and exhibitions should be free, or reasonably priced, without distinction, to all European citizens. In April 2008 the Lithuanian authorities decide drastic measures are necessary to prevent closure of some of the museums. The government issues a decree that all museums in the country should take the following measures:

They should charge entry fees which are high enough to make some impact on their finances, but not so high as to deter those visitors who can afford them, i.e tourists and middle-aged people in work. Exceptions should be made for Lithuanians under 25 or over 65, and Lithuanian unemployed, on production of documentary evidence of age or unemployment.

a) Thomas, a Scottish teacher, who has a Lithuanian mother, takes a class of twenty 15-year-old schoolchildren on a trip to Lithuania. He wants to travel around with them, to show them as much of the country’s culture as possible. Upon arriving at the various museums, he finds that his budget simply does not stretch far enough to pay the very high entry fee to the national museum of Vilnius, and that he has barely enough to pay the more modest entry fees to the other museums. He is sympathetic to the arguments presented to him: the money is urgently needed, he can
see the dilapidated state of some museums, and the small numbers of visitors. Nevertheless, he pleads with the museum curators at least to make some concessions. Some agree and let his class in for a nominal fee, The national museum makes a small 5% reduction by way of a goodwill gesture.

b) The privately owned arts and crafts museum in Thomas’s mother’s home town has organised a special exhibition of local arts and crafts. They do not charge anyone under 25, in direct defiance of government policy instructions, and ask everyone above that age to pay a modest entry fee. The exhibition is a great success. The museum director is severely reprimanded by the central government for his extraordinary actions. He is told to close down the exhibition, and not to expect any state subsidies for the museum from now on.

Consider both scenarios and advise both Thomas and the museum director as to means of redress open to them under European Union law. This question required a discussion of discrimination, direct and indirect effect of Directives and/or of Member State liability for breach of Community law.

(a) Is there breach of Community law? The Lithuanian museums do not charge fees to certain categories of Lithuanians. Obviously, the concessions made are not sufficient to eliminate discrimination as to nationality. This is direct discrimination and cannot be justified by arguments of protection of culture or education. Article 12 has horizontal and vertical direct effect (van Gend) and Thomas can rely on this to bring a complaint in the national court. As regards the children, they also are entitled to take action. It would depend on national rules
whether a group action could be brought. This does not need to be discussed here.

(b) This is clearly a case of breach of the Directive by the Member State. The Directive’s date of implementation has expired. The Director’s actions are in compliance with the Directive, with the possible exception of the absence of charges for under-25-year-olds, which could arguably constitute age discrimination, but may well be justified.

The reason for reprimanding the Director is that he is not charging enough, in defiance of government policy, but in compliance with the Directive. If the Directive is clear and precise enough to have direct effect the Director can rely on it in his national court and should get a remedy. If the Directive does not fulfill those criteria, there could either be indirect effect according to the Marleasing criteria, or the director could go against the Member State for breach of Community law.

COMMERCIAL LAW - 2008 EXAMINER'S REPORT -

2009-11-05T07:03:00.000-08:00

Question 1
“Does Commercial Law exist?” (Goode, 2004)

This is a challenging question that needs confident handling and a good overall understanding of commercial law. Unlike other questions, which direct candidates to the particular area to be discussed, this invites the candidate to set her or his own boundaries. One might argue, for instance,that a distinct subject called Commercial Law does not exist and that those elements often contained under such a heading are really parts of other areas of law, such as contract and property law. This argument might be reinforced by the difficulty of defining what constitutes Commercial Law: does it include, for instance, law relating to the formation and structure of companies and partnerships and the protection of ‘consumer’ rights? On
the other hand, it could be argued that the categorisation of the law into Contract, Tort, etc., is unhelpful and what business people (and the courts) find useful is the drawing together of rules into a body of law that regulates their transactions – sales, payments, agency, etc. Moreover, it might be suggested that there are certain principles that draw together apparently disparate rules into a single body of Commercial Law. The good student would discuss this issue and illustrate the argument by reference to areas of law studied during the course.

Question 2
‘The relationship of principal and agent can only be established by the consent of the principal and the agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it.’ (Lord Pearson in Garnac Grain Co Inc v H M F Faure & Fairclough Ltd and Bunge Corpn)

Discuss.

This quotation seeks to bring out an analysis of agency through a critique of the statement by Lord Pearson that consent is required. As he says, this consent may be deemed to present even though the parties had no subjective intention to create an agency. Consent may also come after the contract where a party ratifies the act of someone who, without authority, purported to act as their agent. The question of whether there is consent in undisclosed agency might also be considered as might the cases on agency of necessity, including, perhaps, consideration of whether all of the cases so classified are, indeed, agency of necessity cases.

Question 3
What problems are presented by sales involving the transport of goods between different countries and how has the law sought to deal with these problems?

This is a fairly broad question, inviting students to identify the problems encountered in international trade and the ways in which the law has tried to deal with them through, for instance, cif and fob contracts and the use of documentary credits. It is challenging in that there is potentially a lot of material that might be included and the student needs to identify some key issues and the legal solution to those issues in order to illustrate the more general point. Merely running through a description of cif and fob contracts and documentary credits is not enough to answer the question that has been posed.

Question 4
‘In the law of documentary credits it is important that the fraud exception is clearly defined so that it does not undermine the principle of autonomy and so reduce the value of documentary credits as a means of international payment.’
Discuss.

Some of the candidates who answered this question wrote a general essay on letters of credit and spent most of their time describing how they worked. This meant they were only able to refer very briefly to the issue of fraud, though this is the main point that needs to be addressed. It is important not to waste time with matters that are not related to the question. What is needed is a clear understanding of what is meant by ‘the fraud exception’, how it might (or might not) undermine the ‘principle of autonomy’ and, in turn, how that might undermine the value of the letter of credit.

Question 5
Shakespeare Ltd (‘Shakespeare’) is a manufacturer of widgets and seeks your legal advice on the following transactions. Greene is fully authorised by the board of directors of Shakespeare to undertake all purchasing and selling on behalf of Shakespeare.

(i) Greene is approached by Beaumont, who is acting for Fletcher Ltd (‘Fletcher’),
a large retailer of widgets. Beaumont says, ‘We at Fletcher are looking to purchase a quantity of widgets, but we will not be able to pay until 60 days after delivery. I know Shakespeare’s policy is to require cash on delivery, but could you see if the board of directors would be willing to extend credit in this instance?’ He is aware that Greene does not have the authority to give credit. A short time later he is contacted by Greene, who says, ‘The board is happy to allow Fletcher credit.’ The deal is agreed for delivery on 60 days’ credit. The board of directors of Shakespeare was never approached by Greene and does not want to go ahead with the deal.

(ii) Greene has agreed a sale of widgets to Marlowe Ltd (‘Marlowe’) on credit. Marlowe represented itself as a retailer of widgets but, in fact, Marlowe had been asked by Webster Ltd (‘Webster’) to obtain the widgets. Webster used Marlowe because, as Marlowe was aware, Greene refuses to do business with Webster because it has had a poor record of payment for deliveries in the past. All parties know that Marlowe has an excellent credit history. Shakespeare has discovered the truth and does not want to deliver the widgets to Marlowe. (iii) Shakespeare has recently taken over a widget retailing business, which had previously been owned by Jonson. Jonson agrees to continue to manage the business and to permit his name to remain on the shop, but he promises not to buy goods. Shortly after this deal has been agreed, Jonson is offered a quantity of splogets at a low price by a manufacturer. Knowing that there is a strong demand for splogets and believing that Shakespeare will welcome this easy profit, he buys the splogets on credit. Shakespeare’s board of directors has discovered this transaction and does not want the splogets.

Discuss.

The three parts of this question directed students to discuss particular issues relating to agency. In answer to (i), many students were able to identify the relevance of cases like First Energy Ltd v Hungarian International Bank Ltd and Armagas Ltd v Mundogas SA, but many did not display an understanding of the difference between these cases, whereas the good answer demonstrated the possible distinctions that could be drawn between these two decisions and even speculated on which might be the more influential decision in subsequent cases. In (ii), in spite of the criticism in the subject guide and in Sealy and Hooley, some candidates persisted in citing Said v Butt without any critical analysis of that decision. Some candidates did mention other cases (such as Dyster v Randall), but they often did not distinguish those cases from Said and so were left unable to draw any firm conclusions about the law in this area. It is important both to understand decisions and to be able to explain clearly the criticisms that have been made of them, even if those criticisms are ultimately rejected. It is not enough merely to say that a case is wrong without explaining why it is wrong. Similarly, in (iii), many recognised that the facts resembled Watteau v Fenwick, but too often candidates
simply applied that decision without presenting any of the criticism that it has drawn, other than to say that it has been doubted by scholars and judges. The good students tried to explain why it has been doubted.

Question 6
EITHER

(a) Gardens-‘N’-You Ltd (‘Gardens’) sells bags of ‘Compo’, an artificial compost.
This product is made up by Acme Ltd (‘Acme’), a manufacturer of chemical products, according to a recipe provided by Gardens. This recipe stipulates the use of particular constituent elements in the compost. The recipe also permits Acme to use ‘a stabiliser’, but does not specify what this should be. The stabiliser used by Acme is a chemical product known as Blixo. Unfortunately, Blixo, while harmless to other garden flowers, is poisonous to roses when mixed with the other elements specified in the formula by Gardens. Gardens is unaware that Blixo has been used.
Janet, a professional rose grower, buys some Compo and digs it into her rosebeds. As a result, she loses her crop of roses.
Discuss.

What difference might it have made to your answer if the bags of Compo have a label stating they contain Blixo and the possible effect of Blixo when used in some types of artificial compost has been mentioned in trade newspapers circulating among those in the garden industry, but Janet has not seen these newspapers?

OR
(b) ‘The provisions on satisfactory quality in the Sale of Goods Act add
nothing to the rights that a buyer has under section 14(3).’ Discuss.

(a) The facts resemble those in Ashington Piggeries and a good knowledge of that case is invaluable for answering this question. The best answers considered sections 14(2) and 14(3). There may also be an issue concerning liability for description under section 13, but there is little information here and, while this is an issue that is worth mentioning, it was not worth spending too much time on it. Most candidates looked at Janet’s rights and Compo’s liability, but the question asked them to ‘discuss’, so there should also have been some consideration of the liability
of Acme to Compo and a recognition of the courts’ tendency to allow liability to go up the chain to the manufacturer: e.g. the ultimate buyer sues their seller, that seller sues the manufacturer. A few students seemed to think that Janet could sue Acme for breach of contract and some argued that Janet was a consumer and so had additional rights.

(b) This required a confident understanding of the provisions in sections 14(2) and 14(3). While most provided a reasonable knowledge of what these sections contained, some candidates were not as well informed about the relevant cases and some were a little confused over the difference between the old concept of merchantable quality and the present requirement of satisfactory quality and on how they should handle the
cases that predated the change in the law (e.g. how helpful are they in determining rights under section 14(2)?).

Question 7
Kargo Ltd (‘Kargo’) imports oil. It refines the oil and is contemplating entering into a contract for the sale of oil to Archer Ltd (‘Archer’), which supplies heating
oil to factories and offices. Archer already obtains oil from various suppliers and
all the oil is stored in one tank. The oil Archer is proposing to buy from Kargo
will also be stored in this tank. Kargo is keen to do business with Archer, but
recognises that it cannot expect Archer to pay the full price on delivery. Kargo is
concerned about its legal position in the event that Archer becomes insolvent
before full payment is made.
Advise Kargo.

A lot of candidates got into something of a tangle over this question, thinking that by Archer mixing the oil from Kargo with oil from other suppliers the goods had become unascertained or quasi-specific and so property did not pass. But, of course, Archer is the buyer and what Archer does with the oil will not prevent property from passing. This question asks you to advise Kargo how it might protect itself in the event that it delivers oil on credit to Archer, which Archer mixes with other oil, and Archer then becomes insolvent. Candidates needed to discuss the problems that this poses. For instance, if Archer is insolvent, Kargo will not be able to claim
much or any of the funds owed under the contract, so Kargo would prefer to retain property in the oil until payment is made. This raises the possibility of incorporating into the sale contract a retention of title clause. The good answer discussed the various types of clauses that might be appropriate, the advantages and disadvantages of each type of clause, and whether they can achieve their objectives (e.g. retaining property in the oil, or obtaining an interest in the product made from the oil, or the proceeds of its sale).

Question 8
Advise Tiresias Ltd (‘Tiresias’) on all of the following transactions.

(i) Tiresias sold a quantity of currants to Eugenides Ltd (‘Eugenides’) on terms ‘CIF
London’. The cargo of currants was loaded onto a vessel and it commenced its voyage. The vessel sank and the cargo was lost. Tiresias then presents the relevant documents to Eugenides and demands payment. Eugenides has become aware of the loss of the cargo and refuses to take up the documents or to pay.

(ii) Tiresias sold a quantity of raisins to Eliot Ltd (‘Eliot’) on terms ‘CIF Harwich’. The cargo was loaded later than the date stipulated in the contract, but the bill of lading was altered by the forwarding agent so as to represent that the goods had been loaded on time. Eliot discovered this and rejected the documents. The delay in loading has had no effect on the quality of the raisins. Eliot’s motive for rejecting the documents is that the price of raisins has fallen and so Eliot wants
to escape from its contract with Tiresias in order to buy raisins at the lower price.

(iii) Tiresias sold a quantity of sultanas to Stetson Ltd (‘Stetson’) on terms ‘FOB,
Liverpool, shipment September’. Under the terms of the contract, Stetson was obliged to nominate a vessel. On 20th September, Stetson nominated the Wasteland, which was already in dock. The following day, Tiresias began to load the sultanas, but did not have sufficient to fulfil the contract and so waited for a further supply to arrive. The loading was completed just before midnight on 30th September. The vessel sailed the following day. Stetson claims Tiresias failed to fulfil its duty to deliver the goods as stipulated in the contract.

(iv) Tiresias sold a quantity of dried apricots to Pound Ltd (‘Pound’) on terms ‘FOB, Hull’ for loading between 20 and 25 October. Tiresias delivered the dried
apricots to the dockside at Hull on 1 October. When loading began on 20 October it was discovered that the dried apricots had deteriorated. Pound rejected the goods.
These are relatively straightforward questions for those who have a secure knowledge of cif and fob contracts. The best answers gave some explanation of the issues and legal rules and so demonstrated the candidates’ understanding of the underlying issues. It was also important to provide support through the citation of relevant cases.
(i) Most candidates recognized the obligations of Eugenides, but few went on to explain why Eugenides had those obligations and what claims it might have (e.g. a claim under the insurance contract).

(ii) Candidates needed to state clearly the obligation of each of the parties. For instance, what must Tiresias do and what must Eliot do? What are the consequences of breach in regard to these obligations? Is the motivation for rejecting the goods relevant where there is a right to reject? What cases apply to these issues?

(iii), (iv) Again, some candidates did not explain clearly the obligations and rights of the parties involved and did not cite relevant cases, and in relation to (iv) the better candidates recognized the possible impact of s.14(2) and s.14(3) of the Sale of Goods Act 1979.

LAND LAW - 2008 EXAMINER'S REPORT

2009-11-05T06:48:00.000-08:00

“The Land Registration Act 2002 has effectively abolished the law of adverse
possession, in the sense that it will be extremely rare in the future for a claim
based on adverse possession to be successful.”
Discuss.

An important issue in this question is to achieve the right
balance between the old law and the new law. It is important to define adverse possession, to consider the effect of the expiry of the limitation period (distinguishing carefully between registered and unregistered land) and to assess the various arguments (e.g. based on conveyancing or human rights considerations) in favour of reform. Against this background candidates would then be expected to examine the LRA reforms. These are based on the principle that the mere lapse of time should no longer bar registered titles and they are mainly set out in LRA Sched. 6. Candidates would then reach a final assessment on the likelihood of
claims being successful in the future. In this context a good answer would have considered those situations where objections to a squatter’s application are to be disregarded (para. 5) as well as the strong incentive that now exists for owners of unregistered land to register their titles.

Question 2

In 2000 Ann and Paul purchased a house where they went to live with their baby daughter, Clare. The house was registered in their joint names. The purchase price of the house was £400,000; Paul paid the £40,000 deposit and the remaining £360,000 was raised on the security of a mortgage with the Westshires Bank for which they were jointly responsible. In the years that followed Paul, a prosperous lawyer, paid all the mortgage instalments as well as most of the household expenses, while Ann ran the home and looked after Clare and their son Eric (born in 2004). Paul has recently formed a relationship with Diana with whom he is now living. He has written to Ann, indicating that he would like to sell the house. Ann, however, would like to
continue living there with the children.

Advise Ann. If the house were sold, how would the proceeds of sale be divided?

Would your advice differ if the house had been registered in Paul’s sole name?

This was a popular question, but the answers were often disappointing. Many candidates failed to refer to the application of TOLATA and many, surprisingly, seemed unaware of recent developments in the law relating to resulting/constructive trusts. In particular, the HL decision in Stack v Dowden required careful analysis and application. While under Rosset Ann’s claim to a beneficial interest in the house might fail (no agreement to share and no contribution to the purchase price),
under Stack the legal joint tenancy would give rise to the presumption of an equitable joint tenancy and a heavy burden of proof would lie on Paul to rebut this presumption. Moreover, in quantifying the beneficial interests, the HL made it clear that the court may take into account a wide range of factors, only one of which is the extent of contributions to the purchase price, albeit an important one. In determining whether to order sale under TOLATA 1996 s.14 the court would take into
account several factors (s.15), including the purpose of the original purchase and the welfare of the children. The case law (e.g. Barca v Mears) suggests that a court would order sale here. Without further information it is difficult to assess how the balance of the proceeds of sale would be divided between Ann and Paul, but a 50/50 split would be a real possibility. If the house had been registered in Paul’s sole name, the burden of proof would be on Ann to rebut the presumption that he was the sole beneficial owner. However, it is clear from the PC case of Abbott v Abbott that, as in Stack, the parties’ whole course of dealing in relation to the property must be taken into account in determining their shared intentions as to its ownership.

Question 3

Oswald was the registered owner of the Blackacre Estate. On the estate there were three empty cottages (A, B and C). In 2001 he sold cottage A to Pam, who covenanted with Oswald and his successors-in-title to use the cottage for residential purposes only. In 2003 Oswald invited Lucy, a young artist friend, to occupy cottage B. “You can stay as long as you like”, he wrote to her, “and I don’t want any rent, as it will be reassuring for me to know that the cottage and garden are being looked after.” Lucy accepted the invitation and moved into the cottage. In 2005 Oswald agreed to let cottage C to Wendy for five years at an annual rent. Wendy moved in. In 2007 Oswald sold Blackacre to Arthur. Arthur now wishes to know (a) whether he can
prevent Ruth, the present owner of cottage A, from starting a pottery business in the cottage, and (b) whether he is entitled to possession of cottages B and C.
Advise Arthur.

A common error here was for candidates to concentrate on cottage A and to deal ather cursorily with cottages B and C. The legal principles involved were very different and the cottages required separate consideration. For cottage A the question was whether the burden and benefit of the user covenant had passed to successors-in-title to the original parties. The passing of the burden was governed by the equitable doctrine of restrictive covenants, as most candidates realised, though the need for an entry on the land register was often overlooked. The passing of the enefit depended on annexation (the possibility of an assignment or a building scheme seemed rather remote) and this in turn required a discussion of Federated Homes and Crest Nicholson. Assuming that both the burden and the benefit had passed – and here is not enough information to reach a firm conclusion – Arthur could enforce the covenant against Pam. As most candidates recognised, Lucy would seem to have a licence to occupy cottage B (the requirements for a tenancy are absent) and it seems unlikely that her licence was supported either by a contract by an estoppel. Arthur would then be entitled to possession. As regards cottage C, very few candidates realised that Wendy might only have a contract for a lease (assuming that the LPMPA 1989 s.2 formalities had been satisfied) and that Arthur would not be bound by the contract unless Wendy had protected it by notice on the land register or, as was likely, she was in actual occupation (LRA 2002 Sched.3 para.2).

Question 4
Mr and Mrs Clarke were the registered owners of Stanstead Manor. In 1998 Mr Clarke wrote to their daughter, Jane, inviting her to come and live with them and look after them in their old age. “I know that we are asking you to make a substantial sacrifice,” he wrote, “but we would give you an allowance, we would pay all the household expenses, and, of course, the house will be yours when we are dead.” Jane agreed. She lived with her parents and looked after them until her father’s death in 2007. Mrs Clarke and Jane have now quarrelled and Mrs Clarke has asked Jane to leave the house. Mrs Clarke wishes to sell the house and buy a smaller one near her sister. She has stopped Jane’s allowance and she has made a new will leaving all her property to her sister.
Advise Jane.

As most candidates recognised, this problem provided a classic illustration of proprietary estoppel. Jane must show that a promise had been made to her, that she had relied on that promise to her detriment and that in all the circumstances it would be unconscionable for the promisor to break his promise (Gillett v Holt). A promise may, as here,relate to a gift of property to take effect on the promisor’s death (e.g. Re Basham). Detriment may take the form of services (e.g. Greasely v
Cooke), but it must be weighed against any benefits received (e.g. free Accommodation in Sledmore v Dalby). There is a presumption of reliance, which is not easily rebutted (Wayling v Jones, Campbell v Griffin). Assuming that all these conditions were satisfied, the question arose as to how Jane’s equity should be satisfied. In most recent cases a monetary award has been made and, as in Jennings v Rice, the need for proportionality has been stressed in the task of determining whether to compensate a claimant for detriment incurred or for the loss of
expectation. Most candidates dealt well with these issues. A first-class answer would additionally have considered the fact that the promisor (Mr Clarke) was dead, the possibility that the promise was conditional on Jane looking after her parents until both had died and the reasons for the quarrel.

Question 5
James was the registered owner of two adjacent properties, Greyacre and Whiteacre. He lived on Greyacre and in 2004 he sold Whiteacre to his friend, Liza, to run a poultry business. The conveyance made no mention of any easements but, as Liza knew, James had for many years used a track across Whiteacre which led to the local village, and Liza never objected to James
continuing this use. James invited Liza to use the swimming-pool on Greyacre
whenever she wished, and, at her request, he executed a deed allowing her
to place a notice advertising her business (“Chickens and eggs for sale”, it
read) next to the front gate to Greyacre. In 2006 James sold Greyacre to
Mark and Liza sold Whiteacre to Rowena. Mark now insists (a) that he is
entitled to use the track across Whiteacre and (b) that Rowena has no right
to use the pool or to maintain the notice on Greyacre.
Discuss.

This popular question invited candidates to consider (i) whether the rights claimed were capable of existing as easements, (ii) if so, whether they had been effectively acquired, and (iii) if so, whether the burden of the easements had passed to the purchasers of the two tenements. Candidates handled the first part well, discussing Re Ellenborough Park and concluding that, while a right of way and a right to fix an
advertising sign might exist as easements, a right to use a pool could not. A common error, however, was for candidates to conclude that a right of way over the track had been created either under the rule in Wheeldon v Burrows or by virtue of LPA 1925 s.62, neither of which was applicable. Instead, candidates should have considered the limited circumstances in which an easement may be impliedly reserved in favour of the grantor of land. In particular, could it be an intended easement? The third issue, which most candidates failed to address, involved a consideration of the LRA 2002. On the assumption that James had an implied right of way over Whiteacre, would Rowena be bound by it? (Sched. 3 para. 3) And on the assumption that Rowena had an express easement to maintain a sign on Greyacre, would Mark be bound by it? (s.27(2)(d)

Question 6
“Where the only circumstances are that residential accommodation is offered
and accepted with exclusive possession for a term at a rent, the result is a
tenancy.” Elaborate this statement and consider the extent to which it provides a
useful guide for distinguishing a tenancy from a licence.

Although most candidates attempting this question recognised the quotation from Street v Mountford, a surprisingly large number failed to examine the significance of the Street principle and its application in subsequent case law. Lord Templeman recognised that there were exceptions to the principle, and these needed to be looked at, but in most instances the lease/licence distinction rested on whether or not there was exclusive possession. Where the landlord provided services or retained a key giving him access to the land, or excluded the occupier from the land at certain times, would exclusive possession be negatived? What has been the attitude of the courts to 'sham' devices? (Consider, e.g., Aslan v Murphy, Huwyler v Ruddy.) Multiple occupation agreements have come under particular scrutiny (Antoniades v Villiers) and the courts have shown themselves reluctant to interpret licence
agreements as creating a joint tenancy carrying with it joint liability for the rent (Stribling v Wickham, Mikeover v Brady). Finally candidates were expected to discuss the application of the Street principle by the HL in Bruton v London and Quadrant Housing Trust, which seems to blur the lease/licence distinction by recognising the possibility of a non-proprietary lease.

Question 7

In 1999 Sharon and Fred purchased a house as their matrimonial home and it
was registered in their names as beneficial joint tenants. Sharon paid the
deposit on the purchase price (a loan from her mother) and the remainder of
the price was raised on the security of a mortgage with the Midshires Bank
for which Sharon and Fred were jointly responsible. Six months ago Fred fell
ill and lost his job, and now they have started to default on their mortgage
repayments. The bank is threatening to seek possession with a view to
selling the house.

Advise Sharon and Fred on the following three issues: (a) whether they can
insist on the bank postponing sale, both because Fred has recovered from his
illness and has a good prospect of finding a job soon and because they
anticipate an upturn in the housing market; (b) whether, if the house has to
be sold, they can insist on conducting the sale themselves, as they are
confident that they would obtain a better price; (c) how the proceeds of sale
would be divided.

Few candidates attempted what was a fairly straightforward question on mortgages and, in particular, on the mortgagee’s power of sale. Part (a) raised two issues. The first was the court’s discretion under AJA 1970 s.36 to postpone a possession order where it appears that the mortgagor is likely to be able, within a reasonable period, to pay sums due under the mortgage (see Cheltenham and Gloucester BS v Norgan). The second related to the mortgagee’s power to sell at a time of its own
choosing. It is not required to wait for an upturn in the housing market, though in exceptional circumstances it may be required to accelerate the sale (as in Palk v Mortgage Services Funding). Part (b)invited a discussion of the duties imposed on a mortgagee exercising its power of sale and, in particular, its duty to obtain the true market value (Cuckmere Brick). While the courts may, in rare cases, postpone
possession to enable the mortgagor to sell (Target Home Loans v Clothier), there is no such jurisdiction in cases of negative equity. Part (c) involved a discussion of LPA 1925 s.105 and, in particular, of the way in which any balance would be divided between Sharon and Fred. As beneficial joint tenants, they would be entitled to equal shares (Goodman v Gallant). Sharon’s mother was, of course, an unsecured
creditor.

Question 8

In 2004 Len granted a five-year lease of Greenacre, which is registered land,
to his neighbour Tony. Tony covenanted to pay an annual rent and not to
build either on Greenacre or on any of his other land which adjoined Len’s
land. In 2006 Tony assigned his lease to Alf and Len assigned his reversion to
Rob. Rob has never received any rent and he understands that both Tony and
Alf have plans to build.

Advise Rob whether he is bound by the lease and, if so, whether and against
whom he can enforce the covenants.

This was a fairly straightforward question on the LTCA 1995 and, given that the lease was granted in 2004, it was unnecessary to consider the pre-Act law (as some candidates did). Rob is clearly bound by the lease; legal leases not exceeding seven years are overriding interests (LRA 2002 Sched. 3 para. 1), a point generally overlooked by candidates. Moreover, the benefit of tenant covenants passes on the
assignment of the reversion to Rob in 2006 (LTCA 1995 s.3(1)). Rob will therefore be able to recover the rent falling due after the assignment of the reversion to him. From whom? When Tony assigns his lease to Alf, Tony is released from the tenant covenants (s.5) and the burden of the tenant covenants passes to Alf. The dates have been deliberately left vague, but it is clear that, except in three special cases,
Tony will not be liable for rent falling due after the assignment, nor will Alf be liable for rent due before the assignment (ss.23, 24). Similarly, the benefit and burden of Tony’s covenant not to build on Greenacre will pass both on the assignment of the reversion to Rob and on the assignment of the lease to Alf. Thus Rob will be able to enforce the building covenant against Alf. However, Tony’s covenant not to
build on his adjoining land may not be considered a 'tenant covenant' (i.e. one falling to be complied with by the person for the time being entitled to the term, BHP Petroleum Great Britain v Chesterfield Properties). If this is so, neither s.3(1) nor s.5(1) would apply. A firstclass answer might consider whether Rob might still be able to enforce the covenant if the benefit had passed to him under the general law (Swift Investments v Combined English Stores) or, conceivably, if the
Contracts (Rights of Third Parties) Act 1999 applied in his favour.

LAND LAW - EXAMINATION QUESTIONS

2009-11-05T06:36:00.001-08:00

lives in Rose Cottage, the matrimonial home, of which her husband, H, was the registered proprietor with absolute title. In 2005 H deserted W and mortgaged the cottage to B Bank. The mortgage payments are well in arrears and B Bank now seeks possession of the cottage. W, who had given H £10,000 towards the purchase-price of the cottage, refuses to leave. Discuss.

The issues to consider are:

What is the nature of W’s interest in the cottage?
Does it bind the bank?
Does her contribution to the purchase price give her an equitable interest behind a trust for sale (now a trust of land governed by the TLATA)? If so, could she have protected her interest on the land register? Could she rely on her occupation of the cottage to give her an overriding interest? Consider Boland and Cann, and the effect of the Land Registration Act 2002.
What about her right of occupation under the MHA (today the Family Law Act 1996)?

Question 2 ‘The law as to notice as it may affect purchasers of unregistered land has no application, even by analogy, to registered land.’ Discuss.

A good answer would start by explaining the doctrine of notice in the context of unregistered land, and it would go on to consider whether it applied at all, ‘even by analogy’ to registered land. It is best to start by examining the extent to which the doctrine remains important today, and the extent of the burden it places on purchasers. You should then consider the principles of registered conveyancing. Clearly, if the register is everything, there is no room for the doctrine of notice. All the same, the wide range of ‘overriding interests’ still place a considerable burden on purchasers. Is this burden ‘analogous’ to that facing purchasers of unregistered land? There is a lot of case law that you might refer to, and a good answer would look at the ways in which the 2002 Act has tried to alleviate
the burdens on purchasers of registered land. Also, does Schedule 3 of the LRA 2002 perform a function similar to that of notice in unregistered title?

Question 3 Lucy was the registered proprietor of Pinkacre. In 2004 she granted Peter a five-year lease of a cottage on Pinkacre; in 2005 she contracted to grant Quentin a four-year lease of a field for grazing purposes; in 2006 she agreed orally to let Rick have exclusive use of a barn for three years at an annual rent of £300, and she invited Rick to pick as many apples as he liked from her orchard. In 2007 she sold Pinkacre to William, who has now written to Peter, Quentin and Rick telling them to keep off his land. Discuss.

This is not a question on leases and licences; the key issue is whether William, the purchaser of Pinkacre, would be bound by the interests of Peter, Quentin and Rick, a question which required an understanding of the LRA 2002. Thus, Peter’s five-year (legal) lease is not compulsorily registrable and would clearly bind William as an overriding interest within Sched.3 para.1. Quentin’s contract for a lease, even if not protected on the register, would bind William as an overriding interest within Sched.3 para.2, summing that he is in actual occupation. Rick would appear to have a (legal) three-year tenancy of the barn (LPA 1925 s.54(2)) which would bind William under Sched.3 para.1. On the other hand, Rick’s bare licence to pick apples on Pinkacre would not be a proprietary interest capable of binding a purchaser.

‘The Trusts of Land and Appointment of Trustees Act 1996 has at last placed the law relating to settlements and trusts for sale of land on a rational and straightforward basis.’
Discuss.

This question requires some historical comment on strict settlements and trusts for sale and the practical difficulties of each, including accidental creation of strict settlements, the role of the life tenant in a strict settlement, the doctrine of conversion, and the operation of the duty to sell under a trust for sale. Section 30 LPA should be discussed in outline (see also chapter 5) and then the main features of the 1996 Act explained and evaluated, in particular the new powers and duties of trustees of land. Remaining areas which are not ‘rational and straightforward’ should be suggested e.g. s.8, which deals with consent requirements and also allows a settlor to remove powers of disposition which the trustees of land would otherwise have; and the continued existence of old strict settlements, which could easily have been converted by statute into trusts of land).

LAND LAW -

2009-11-05T05:59:00.000-08:00

Alteration and indemnity

The LRA 2002, Schedule 4 contains the current relevant principles on alteration and indemnity. A key feature of Schedule 4 is that ‘rectification’ of the register is now confined to a change ‘which prejudicially affects the title of a registered proprietor. i.e situations where a registered proprietor ‘loses’ something registered in his name. Rectification only now occurs when due to a mistake, someone has been wrongly registered as owner. All other changes to the register are now called ‘alterations’. Rectification will only be given against a registered proprietor who is in possession of the land if:

(a) he has by fraud or lack of proper care caused or substantially contributed to the mistake;
or
(b) it would for any other reason be unjust for the alteration [rectification] not to be made. (Schedule 4, paragraph 6(2)).

Schedule 8 of the 2002 Act covers indemnity. Generally a registered proprietor against whom rectification is ordered will be entitled to compensation, to the value of the interest he loses; the Chowood rule will still apply.

Further, under Schedule 8 paragraph 5(1), no indemnity is payable where the claimant’s loss is wholly or partly due to his own fraud, or wholly due to his own lack of proper care. A rule similar to contributory negligence in the law of tort also operates under paragraph 5(2). If a person is refused rectification, he or she may still receive an indemnity payment under Schedule 8 paragraph 1(b).

SETTLEMENTS

Settlements are beneficial interests in land created in favour of a series of persons. The rules for settlements were changed greatly in 1925; this was designed partly to prevent the creation of long-lasting settlements, and partly to overcome various problems with the old doctrine of ‘strict settlements’. Today all settlements take effect as trusts for land under the Trusts of Land and Appointment of Trustees Act 1996 (TLATA), although some problems still exist. You need to understand the problems under the old law so that you will be able to appreciate the major changes introduced by TLATA.

Background to settlements

The broad purpose of a settlement is to create a series of beneficial interests in favour of a succession of persons. So, if S wants to transfer his land to A for life, then to B in fee simple, this will be a settlement. Historically, settlements were used particularly by the wealthy and the aristocracy in order to keep land in the ownership of one family for a very long time, preventing its fragmentation. In 1925 there were several key reforms to deter the creation of long-lasting settlements, including: a limitation upon the length of time for which they could run (the rule against perpetuities, of which you do not need to know the details); punitive tax regulation; and the Settled Land Act 1925, which introduced complex and costly rules for the running of ‘strict settlements’, a particular form of settlement which created consecutive interests in the land e.g. to A for life, then to B absolutely.

Since 1925, all strict settlements must involve a trust. But, as is indicated below, it became clear that strict settlements were beset by problems for all involved and they were largely replaced by ‘trusts for sale’. The terminology is however difficult: strict settlements (which can no longer be created) were only one form of settlement, and the term ‘strict settlement’ is still sometimes used to describe a chain of successive interests in land. Until 1997 a trust for sale operated whenever concurrent interests were created in land (e.g. where it was held by a cohabiting couple, co-ownership), or where the term ‘trust for sale’ was applied expressly to a settlement creating consecutive interests. Again, it became clear that the trust for sale was not the most appropriate mechanism for family arrangements which created beneficial interests in land, since its logic was that the trustees of the land had a duty to sell it but only a power to postpone sale; a family rarely views land as only a financial asset, and far more frequently buys land for the primary purpose of retaining it as a home rather than selling it.

The greatest change in this area came in 1997 when a key 1996 statute came into force. While formerly a settlement of land was created either by way of strict settlement, where the purchaser took his title from the tenant for life under the SLA 1925, or by way of trust for sale, where he took it from the trustees for sale, today all settlements take effect as trusts for land under the Trusts of Land and Appointment of Trustees Act 1996 (TLATA 1996 ss.2, 4, 5). The Act came into force on 1 January 1997. Existing SLA settlements are unaffected and will continue to be governed by the complex rules summarised below, but as no new SLA settlements can be created, this area of the law will become increasingly less important, though there are a number of significant pre-1997 cases to appreciate which you will still need an understanding of the scheme of the SLA. All trusts for sale (existing and future, express and implied) now take effect as trusts of land and are governed to a large extent by the TLATA. Thus the focus of your reading should be firmly upon trusts of land under TLATA; it is important to remember that strict settlements are obsolete except for the very few historical ones which still exist; and that there are no longer any trusts for sale.

Cases on trusts for sale will however be useful in interpreting some of the rules of the trusts of land which now replace them. It is important to understand the fundamental difference between a settlement of land (where two or more persons have successive interests in the same land, now almost always under a trust of land) and co-ownership (where two or more persons have concurrent interests in the same land, again now under a trust of land). While the same mechanism now governs both, they are conceptually and historically different.

Strict settlement

SLA 1925 s.1(1) defined a settlement as an instrument under which land stands limited in trust for any persons by way of succession or for an infant in possession for an estate in fee simple or for a term of years absolute. This means that whenever successive interests in land were created, a strict settlement arose, as in the simple example used above: ‘to A for life, then to B absolutely’, or even ‘to A for life, remainder to B for life, remainder to C absolutely’. After 1925 a settlement under the SLA had to be created by two deeds:

1 a vesting deed, which vests the legal fee simple in the tenant for life, describes the property and names the trustees, and

2 the trust instrument, which declares the trusts arising under the settlement.
Where the settlement was made by will, the will constituted the trust instrument and the executors made a vesting assent in favour of the tenant for life. In this way the legal estate was separated from the beneficial interests, as has long been the case with trusts for sale. If no vesting deed was executed the tenant for life or statutory owner could require the trustees of the settlement to execute one (SLA 1925 s.9(2)), and until this was done, no disposition of the land inter vivos could operate to pass a legal estate, unless it was made in favour of a purchaser without notice of the fact that the tenant for life or statutory owner had become entitled to have a vesting deed executed in his favour (SLA 1925 s.13, the ‘paralysing
section’, so-called because it is designed to prevent evasion of the Act by making it generally impossible to dispose of the legal estate).

To illustrate the SLA machinery, suppose that in 1950 land is settled by will on A for life, remainder to B for life, remainder to C in fee simple. The will is the trust instrument and the executors must execute a vesting assent in favour of A. A now holds the legal estate on trust for himself for life and for B and C. Since 1925 life interests and future interests are necessarily equitable. On A’s death the settlement continues. The legal estate vests in A’s special personal representatives (the trustees of the settlement) and B may call on them to vest the legal estate in him, which he will then hold on trust for himself and C. On B’s death the settlement is at an end. The legal estate devolves on B’s general personal representatives
who are bound to convey it by ordinary assent to C, the absolute owner. (The remaining discussion of a strict settlement assumes that the settlement was created validly before 1997.)

Roles and rights

Tenant for life

The tenant for life is defined as any person who is of full age and beneficially entitled to possession (SLA 1925 ss.19, 20) and in the rare cases where there is no tenant for life or the tenant for life is a minor, the legal estate is to be vested in the statutory owner (usually the trustees of the settlement). Since 1925 the legal estate and the statutory powers are vested in the same person (usually the tenant for life) to hold on trust for those entitled under the settlement. The tenant for life has considerable powers, the most important of which (the powers to sell, lease and mortgage) are exercisable upon giving notice to the trustees of the settlement. There are certain statutory restrictions on the exercise of these powers (SLA 1925 ss.41, 71) and dispositions which do not comply with the requirements of the Act are void (s.18), but as long as the tenant for life acts bona fide, it appears that neither the trustees nor the court may interfere with the exercise of his or her powers.

The powers of the tenant for life are not assignable and although the settlement may confer upon him or her additional powers, any provision designed to cut down his or her powers is void (SLA 1925 s.106). Consider a proviso that the tenant for life is to forfeit her interest on ceasing to reside on the settled land. If the tenant for life ceases to reside in the exercise of his statutory powers (e.g. as a result of selling the land), the proviso is void, but if she ceases to reside for some other reason, the proviso is operative and his interest determines: see Re Ames and Re Acklom.A residence condition (a requirement that a tenant for life must reside on the settled land) can be more effectively enforced if the land is settled on a trust of land.

Trustees of the settlement

SLA 1925 s.30 defines who shall be the trustees of the settlement. Although the legal estate in the settled land is not vested in them as trustees, they have important functions in relation to the settlement. They give consent to certain transactions and they receive notice from the tenant for life of his intention to effect certain transactions. Moreover, they receive and hold capital money (e.g. money arising from the sale, lease or mortgage of the land) and they must apply it in one of the ways set out in the SLA s.73, as the tenant for life may direct.

Purchaser of settled land

A purchaser is not entitled to see the trust instrument and he or she is entitled and bound to assume that the particulars in the vesting deed are correct (SLA 1925 s.110(2)). A purchaser dealing in good faith with the tenant for life is taken – as against all parties entitled under the settlement – to have given the best price that could reasonably be obtained, and to have complied with all the requisitions of the Act (SLA 1925 s.110(1)). Provided that he pays the purchase money to the trustees of the settlement, to a trust corporation or into court (as the tenant for life may direct), he gets a good title; the beneficial interests under the settlement are overreached and take effect in the purchase money. The general scheme is clear: the beneficiaries are protected by the requirement that the purchaser pay the purchase money to the trustees of the settlement and the purchaser is protected as long as he or she complies with the provisions of the Act.

Problems with strict settlements

Strict settlements were a strange anomalous form of trust, with trustees who had few real powers and with the most important powers given to the life tenant, a beneficiary. There were also very old-fashioned restrictions upon the life tenant’s ability to dispose of the land other than by sale, e.g. he could not lease it for more than fifty years, and the ability to mortgage the land for such an important reason as to raise money with which to improve the land was severely limited. The documentation required was complex and the wording of the SLA was antiquated. Further, although most lawyers avoided them whenever possible, strict settlements could be created accidentally, particularly when a person wrote his own will and thus created successive interests (e.g. ‘my house is to go to my husband for his life, and then to our son’). The husband in that example would have a power to sell the house as life tenant, with nobody able to prevent him from doing so.

Trusts for sale: Between 1925 and the beginning of 1997, the express creation of ‘an immediate binding trust for sale’ was the method of avoidance of strict settlements. A trust for sale essentially gave the trustees of the land a duty to sell it, and a power to postpone the sale. This was a very artificial way of looking at most land ownership since the equitable interests behind the trust attached to the proceeds of sale rather than to the land itself, with the help of overreaching. The consent of named persons could be required for a sale, and this was sometimes used to make the exercise of the duty of sale difficult. Since the duty to sell was paramount, if one trustee wanted a sale then he could impose his decision on the other(s). Section 30 of the Law of Property Act 1925 gave a discretion to the courts in deciding whether a sale should be imposed in spite of contrary wishes, and a great deal of case law was generated on the issue of how a court should balance competing desires of beneficiaries to sell the land or reside on it. There was also until 1955 a denial that beneficiaries had any right to occupy the land held on trust for sale! See Lord Denning’s speech in Bull v Bull
SG08 Land law.indb 51 18/08/2008 12:10:16[1955] 1 All ER 253 where he held that a beneficiary did have the right to occupy the land; this has been almost universally accepted since. The main problem with the trust for sale’s application to land law was that its premise was simply incompatible with the nature of family trusts of land: a duty to sell, the doctrine of conversion and the initial denial of a beneficiary’s right to occupy the land are not a good fit with the reality of the situation where land provides a home and people care about more than its value as a financial asset.

Trust of land: According to s.1 of TLATA 1996, ‘trust of land’ means ‘…any trust of property which consists of or includes land…’, whether express, implied, resulting or constructive, and whether created before or after the Act itself came into force, except for existing strict settlements. Where a settlement takes effect by way of a trust of land (as all post-1996 settlements will), the legal estate is vested in the trustees of land. All trusts for sale of land are thus converted into ‘trusts of land’. Trustees of land have broader powers than those previously enjoyed by trustees for sale under the LPA ss.28 and 29 (TLATA 1996, ss.6–9), including the power to delegate any of their powers to beneficiaries of full age beneficially entitled to possession. Unlike pre-1997 trustees for sale, they are under no duty to sell the land (TLATA 1996, ss.4, 5). The doctrine of conversion (whereby the interest of a beneficiary under a trust for sale was regarded as an interest in personal property) is abolished (TLATA 1996, s.3), but the overreaching machinery (whereby on payment of the purchase money to two trustees or a trust corporation the interests of the beneficiaries are overreached) is retained. Beneficiaries will generally have the right to occupy the trust land (TLATA 1996, ss.12, 13).

The rules relating to consents and consultation are similar to those which applied to trusts for sale and which were formerly contained in the LPA s.26, but TLATA ss.14 and 15 go much further than LPA s.30 in their provisions, allowing a trustee or beneficiary to apply to the court for an order relating to the exercise of the trustees’ functions, and in the provisions setting out the matters to be considered by the court in determining such an application. It is important that you fully understand the effect of the TLATA on both settlements of land and the co-ownership of land. Co-ownership is considered in Chapter 5, where we shall return to TLATA in more detail.

Strict settlements were a historical method of keeping land in the family for generations. Trusts for sale saw land as just an investment. TLATA has replaced both with a ‘new’ trust of land (although some strict settlements do still exist), where trustees have power to either sell or to retain the land. Both strict settlements and trusts for sale had disadvantages for the beneficiaries and strict settlements in particular were unnecessarily complex. The new trust of land has many advantages over its predecessors, and the courts have a clear role in resolving disputes between trustees and/or beneficiaries. Trustees of land now have the same powers as if they were absolute owners of the land (subject to contrary provisions in the trust instrument), and so are much freer to deal with the land in accordance with the true purposes of the trust. But they also have corresponding duties to consult the beneficiaries and to exercise reasonably their discretion about matters such as which beneficiary may occupy the land. We shall return

COMMERCIAL LAW

2009-10-21T07:42:00.000-07:00

Distributorship and franchise The distributor or franchisee is a principal who sells a particular brand of product (e.g. Volkswagen cars) or runs a business developed by the franchiser. The consumer, who buys goods from either type of business, enters into a contract with the immediate seller and not with the original supplier or franchiser. Whether someone is an agent or a principal will depend on the particular circumstances: for example, was it the intention of the parties that goods supplied would be resold by the recipient acting as principal, or that the goods would be sold on behalf of the principal. See WT Lamb & Sons v Goring Brick Co [1932] 1 KB

The key characteristics of an agency are:

a) The agent acts on behalf of another (the principal) so
that the principal is bound and can sue or be sued by
the third party on the contract made by the agent

b) the agent is not liable on the contract between the
principal and the third party

TYPES OF AGENTS

General agent and special agent

A general agent acts for a principal in the ordinary course of that agent’s business; a special agent has authority only for a particular purpose that is not part of the ordinary course of
business for such an agent. A solicitor would be a general agent if authorised to undertake a range of legal work for a client, but a special agent if only authorised by the client to sell a house.

Factor and mercantile agent

A factor is an agent who is entrusted with the possession of goods or documents of title to goods and who is allowed to sell them in the factor’s own name as a principal (Baring v Corrie [1818] 2 B & Ald 137) or in the principal’s name (Stevens v Biller [1883] 25 Ch D 31). The factor has generally been superseded by the mercantile agent.

A mercantile agent is an agent who, in the customary course of business, has authority to sell or to consign goods for sale, or to buy goods, or to raise money on the security of goods (Factors Act 1889, s.1(1)). The general rule is that handing over goods or documents of title to another does not give that person authority to sell, so that anyone buying the goods will not acquire good title: handing over a car to a mechanic for repair does not constitute an authority to sell the car. A disposition by a mercantile agent is an important exception to this general rule.

Factors Act 1889, s.1 (1), 2(1), (2); Weiner v Harris [1910] 1 KB 285;Official Assignee of Madras v Mercantile Bank of India Ltd [1935] AC 53; Jerome v Bentley & Co [1952] 2 All ER 114). Of course, while the Factors Act provides the third party with rights in the goods so disposed, it does not exempt the mercantile agent from liability to the owner of goods for any breach of authority.

A mercantile agent must conduct a business of dealing in goods: a shop assistant sells goods in the course of the business of another (the shop owner) and, therefore, is not a mercantile agent (Lowther v Harris [1927] 1 KB 393; Sealy and Hooley, pp.343–5). The Factors Act does not expressly exclude the possibility of someone acting as a mercantile agent in a one-off sale, although it does refer to a mercantile agent as someone ‘having in the customary course of his business as such agent’ authority to dispose of goods, which might suggest past – or the prospect of future – such business.

Other agents

Broker: A broker negotiates contracts between a buyer and a seller without having possession of the goods or the documents of title (Baring v Corrie (1818) 2 B & Ald 137).

Produce brokers are key players in the commodity markets and exchanges. Some act for both buyers and sellers by virtue of the custom of particular markets.

Commission agent: A commission agent (or commission merchant) buys or sells goods on
behalf of the owner, but does not establish a contractual relationship between the owner and the third party. The commission agent acts as principal in the contract with the third party. Nevertheless, this agent owes to the owner all the duties of an agent to a principal.

In a sale the agent is liable to the third party (the buyer) for breach of the implied terms as to quality. In a purchase of goods, the agent is liable to the third party (the seller) for the price, but is not liable to the principal for the quality of the goods. Such agents are familiar in civil law jurisdictions. But there has only been a limited acceptance of the idea in English law (Ireland v Livingston (1872) LR 5 HL 395; Robinson v Mollett (1875) LR 7 HL 802) and, in spite of the attractions of this type of agency, it cannot be regarded as part of English law (but
see Aluminium Industrie Vaassen bv v Romalpa Aluminium Ltd [1976] 1 WLR 676, section

The concept of someone who is simultaneously principal and agent does not fit
easily into English agency law because it does not conform to the idea of an agent as one who is able to alter the legal relations between the principal and a third party. English law has, instead, opted for the much less satisfactory idea of the undisclosed principal (see section 3.2).

Confirming houses Confirming houses act for overseas buyers wishing to obtain goods
in English markets. The confirming house can operate in a number of different ways, according to the wishes of the buyer. A confirming house may simply buy and sell without any suggestion of agency, or it may act as an agent for the buyer, or it may act as agent for the buyer and separately undertake to the seller that the buyer will perform (known as confirmation) (see Sobell Industries Ltd v Cory Brothers & Co [1955] 2 Lloyd’s Rep 82).

Forwarding agent A forwarding agent undertakes the transmission of goods for the
principal and is personally liable for the freight charges, which are recoverable from the principal. Such an agent must also exercise reasonable care in relation to the goods.

Del credere agent A del credere agent indemnifies the principal against loss incurred by the third party’s breach of contract in respect of payment, although not in respect of any other breach (Gabriel & Sons v Churchill & Sim [1914] 3 KB 1272). An exporter, who is uncertain about the financial status of a foreign buyer, might find such a guarantee attractive, although the modern tendency is to obtain a confirmation from a confirming house or to rely either on a documentary credit, under which a bank pays the seller on the presentation of certain documents (see Chapter 8), or on credit guarantees, which provide that in the event of the
buyer failing to pay the guarantor will be liable.

CREATION OF AGENCY:

An agency may be created by express agreement between the principal and the agent, where there is a representation by the principal to a third party that the agent has authority (agency by estoppel), where the principal ratifies an act without prior authorisation, where there is an agency of necessity and where agency arises under statute (Sale of Goods Act 1979, s.48(3), RV Ward Ltd v Bignall (1967)

Consent

An Agency is created by the consent of both parties. Where an agency is created by agreement no formalities are normally required. Acting out of friendship or without payment does not preclude agency (Chaudhry v Prabhakar [1989] 1 WLR 29). The appointment may be made orally or inferred from the conduct of the principal. The agent may accept expressly of inferred. For agency to exist,the agent must have some autonomy and not merely perform ministerial function. However, lack of total control does not preclude agency (stockbrokers,etc). If the parties put their agreement into a contractual document, then the court will interprete this as their true intention AMB Imballaggi Plastici SRL v Pacflex Ltd [1999] 2 All ER (Comm) 249; Mercantile International Group plc v Chuan Soon Huat Industrial Group plc [2002] EWCA Civ 288).

Power of attorney

It is commonplace to appoint an agent by executing a power of attorney under the Power of Attorney Act 1971 to overcome the practical difficulties the agent might have in establishing their authority to the satisfaction of third parties. The Enduring Powers of Attorney Act 1985 permits a power of attorney that will continue in spite of the subsequent mental incapacity of the donor, although in that situation the attorney (that is, the agent) must not act (subject to certain xceptions) until the power of attorney has been registered by the court. Under the Act the attorney and third parties are entitled to protections in certain situations where the power of attorney proves to be invalid or is revoked (s.9, Enduring Powers of Attorney Act 1985).

Normally, an agency will be established by consent of both parties. The parties can create the agency by a written agreement (for example, power of attorney), but it is also possible to imply the existence of the agency from the spoken words or the conduct of the parties.

Extract from the GCHQ case, Council of Civil Service Unions v Minister

2009-05-07T06:26:00.001-07:00

Extract from the GCHQ case, Council of Civil Service Unions v Minister
for Civil Service [1985].
LORD DIPLOCK.
My Lords, the English law relating to judicial control of
administrative action has been developed upon a case to case
basis which has virtually transformed it over the last three
decades…
Judicial review, now regulated by R.S.C., Ord. 53, provides the
means by which judicial control of administrative action is
exercised. The subject matter of every judicial review is a
decision made by some person (or body of persons) whom I will
call the "decision-maker" or else a refusal by him to make a
decision.
….
For a decision to be susceptible to judicial review the decisionmaker
must be empowered by public law (and not merely, as in
arbitration, by agreement between private parties) to make
decisions that, if validly made, will lead to administrative action
or abstention from action by an authority endowed by law with
executive powers…. The ultimate source of the decision-making
power is nearly always nowadays a statute or subordinate
legislation made under the statute; but in the absence of any
statute regulating the subject matter of the decision the source
of the decision-making power may still be the common law itself,
i.e., that part of the common law that is given by lawyers the
label of "the prerogative." Where this is the source of decisionmaking
power, the power is confined to executive officers of
central as distinct from local government and in constitutional
practice is generally exercised by those holding ministerial rank.
It was the prerogative that was relied on as the source of the
power of the Minister for the Civil Service in reaching her decision
of 22 December 1983 that membership of national trade unions
should in future be barred to all members of the home civil
service employed at GCHQ.
…… there have unquestionably survived into the present day a
residue of miscellaneous fields of law in which the executive
government retains decision-making powers that are not
dependent upon any statutory authority but nevertheless have
consequences on the private rights or legitimate expectations of
other persons which would render the decision subject to judicial
review if the power of the decision-maker to make them were
statutory in origin. From matters so relatively minor as the grant
of pardons to condemned criminals, of honours to the good and
great, of corporate personality to deserving bodies of persons,
and of bounty from moneys made available to the executive
government by Parliament, they extend to matters so vital to the
survival and welfare of the nation as the conduct of relations with
foreign states and - what lies at the heart of the present case -
the defence of the realm against potential enemies. Adopting the
phraseology used in the European Convention on Human Rights
1953 (Convention for the Protection of Human Rights and
Fundamental Freedoms (1953) (Cmd. 8969)) to which the United
Kingdom is a party it has now become usual in statutes to refer
to the latter as "national security."
My Lords, I see no reason why simply because a decisionmaking
power is derived from a common law and not a statutory
source, it should for that reason only be immune from judicial
review. Judicial review has I think developed to a stage today
when without reiterating any analysis of the steps by which the
development has come about, one can conveniently classify
under three heads the grounds upon which administrative action
is subject to control by judicial review. The first ground I would
call "illegality," the second "irrationality” and the third
"procedural impropriety." That is not to say that further
development on a case by case basis may not in course of time
add further grounds. I have in mind particularly the possible
adoption in the future of the principle of "proportionality" which is
recognised in the administrative law of several of our fellow
members of the European Economic Community; but to dispose
of the instant case the three already well-established heads that
I have mentioned will suffice.
By "illegality" as a ground for judicial review I mean that the
decision-maker must understand correctly the law that regulates
his decision-making power and must give effect to it. Whether he
has or not is par excellence a justiciable question to be decided,
in the event of dispute, by those persons, the judges, by whom
the judicial power of the state is exercisable.
By "irrationality" I mean what can by now be succinctly referred
to as "Wednesbury unreasonableness" (Associated Provincial
Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 K.B.
223). It applies to a decision which is so outrageous in its
defiance of logic or of accepted moral standards that no sensible
person who had applied his mind to the question to be decided
could have arrived at it. Whether a decision falls within this
category is a question that judges by their training and
experience should be well equipped to answer, or else there
would be something badly wrong with our judicial system. To
justify the court's exercise of this role, resort I think is today no
longer needed to Viscount Radcliffe's ingenious explanation in
Edwards v. Bairstow [1956] A.C. 14 of irrationality as a ground
for a court's reversal of a decision by ascribing it to an inferred
though unidentifiable mistake of law by the decision-maker.
"Irrationality" by now can stand upon its own feet as an accepted
ground on which a decision may be attacked by judicial review.
I have described the third head as "procedural impropriety"
rather than failure to observe basic rules of natural justice or
failure to act with procedural fairness towards the person who
will be affected by the decision. This is because susceptibility to
judicial review under this head covers also failure by an
administrative tribunal to observe procedural rules that are
expressly laid down in the legislative instrument by which its
jurisdiction is conferred, even where such failure does not involve
any denial of natural justice. But the instant case is not
concerned with the proceedings of an administrative tribunal at
all.
My Lords, that a decision of which the ultimate source of power
to make it is not a statute but the common law (whether or not
the common law is for this purpose given the label of "the
prerogative") may be the subject of judicial review on the ground
of illegality is, I think, established by the cases cited by my noble
and learned friend, Lord Roskill, and this extends to cases where
the field of law to which the decision relates is national security,
as the decision of this House itself in Burmah Oil Co. Ltd. v. Lord
Advocate, 1964 S.C. (H.L.) 117 shows. While I see no a priori
reason to rule out "irrationality" as a ground for judicial review of
a ministerial decision taken in the exercise of "prerogative"
powers, I find it difficult to envisage in any of the various fields in
which the prerogative remains the only source of the relevant
decision-making power a decision of a kind that would be open to
attack through the judicial process upon this ground. Such
decisions will generally involve the application of government
policy. The reasons for the decision-maker taking one course
rather than another do not normally involve questions to which, if
disputed, the judicial process is adapted to provide the right
answer, by which I mean that the kind of evidence that is
admissible under judicial procedures and the way in which it has
to be adduced tend to exclude from the attention of the court
competing policy considerations which, if the executive discretion
is to be wisely exercised, need to be weighed against one
another - a balancing exercise which judges by their upbringing
and experience are ill-qualified to perform. So I leave this as an
open question to be dealt with on a case to case basis if, indeed,
the case should ever arise.
As respects "procedural propriety" I see no reason why it should
not be a ground for judicial review of a decision made under
powers of which the ultimate source is the prerogative. Such
indeed was one of the grounds that formed the subject matter of
judicial review in Reg. v. Criminal Injuries Compensation Board,
Ex parte Lain [1967] 2 Q.B. 864. Indeed, where the decision is
one which does not alter rights or obligations enforceable in
private law but only deprives a person of legitimate expectations,
"procedural impropriety” will normally provide the only ground on
which the decision is open to judicial review. But in any event
what procedure will satisfy the public law requirement of
procedural propriety depends upon the subject matter of the
decision, the executive functions of the decision-maker (if the
decision is not that of an administrative tribunal) and the
particular circumstances in which the decision came to be made.
*412 My Lords, in the instant case the immediate subject matter
of the decision was a change in one of the terms of employment
of civil servants employed at GCHQ. That the executive functions
of the Minister for the Civil Service, in her capacity as such,
included making a decision to change any of those terms, except
in so far as they related to remuneration, expenses and
allowances, is not disputed. It does not seem to me to be of any
practical significance whether or not as a matter of strict legal
analysis this power is based upon the rule of constitutional law to
which I have already alluded that the employment of any civil
servant may be terminated at any time without notice and that
upon such termination the same civil servant may be re-engaged
on different terms. The rule of terminability of employment in the
civil service without notice, of which the existence is beyond
doubt, must in any event have the consequence that the
continued enjoyment by a civil servant in the future of a right
under a particular term of his employment cannot be the subject
of any right enforceable by him in private law; at most it can only
be a legitimate expectation.
Prima facie, therefore, civil servants employed at GCHQ who
were members of national trade unions had, at best, in
December 1983, a legitimate expectation that they would
continue to enjoy the benefits of such membership and of
representation by those trade unions in any consultations and
negotiations with representatives of the management of that
government department as to changes in any term of their
employment. So, but again prima facie only, they were entitled,
as a matter of public law under the head of "procedural
propriety, " before administrative action was taken on a decision
to withdraw that benefit, to have communicated to the national
trade unions by which they had theretofore been represented the
reason for such withdrawal, and for such unions to be given an
opportunity to comment on it.
The reason why the Minister for the Civil Service decided on 22
December 1983 to withdraw this benefit was in the interests of
national security. National security is the responsibility of the
executive government; what action is needed to protect its
interests is, as the cases cited by my learned friend, Lord Roskill,
establish and common sense itself dictates, a matter upon which
those upon whom the responsibility rests, and not the courts of
justice, must have the last word. It is par excellence a nonjusticiable
question. The judicial process is totally inept to deal
with the sort of problems which it involves.
The executive government likewise decided, and this would
appear to be a collective decision of cabinet ministers involved,
that the interests of national security required that no notice
should be given of the decision before administrative action had
been taken to give effect to it. The reason for this was the risk
that advance notice to the national unions of the executive
government's intention would attract the very disruptive action
prejudicial to the national security the recurrence of which the
decision barring membership of national trade unions to civil
servants employed at GCHQ was designed to prevent.
There was ample evidence to which reference is made by others
of your Lordships that this was indeed a real risk; so the crucial
point of law in this case is whether procedural propriety must
give way to *413 national security when there is conflict between
(1) on the one hand, the prima facie rule of "procedural
propriety" in public law, applicable to a case of legitimate
expectations that a benefit ought not to be withdrawn until the
reason for its proposed withdrawal has been communicated to
the person who has theretofore enjoyed that benefit and that
person has been given an opportunity to comment on the reason,
and (2) on the other hand, action that is needed to be taken in
the interests of national security, for which the executive
government bears the responsibility and alone has access to
sources of information that qualify it to judge what the necessary
action is. To that there can, in my opinion, be only one sensible
answer. That answer is "Yes."
I agree with your Lordships that this appeal must be dismissed.

Extract from the speech of Lord Hope in the case of Campbell v MGN

2009-05-07T06:23:00.000-07:00

Extract from the speech of Lord Hope in the case of Campbell v MGN
[2004] 2 AC 457 241
104 In my opinion the Court of Appeal's approach is open to the criticism that… they failed to carry out the
required balancing exercise.
105 The context for this exercise is provided by articles 8 and 10 of the Convention. The rights guaranteed by
these articles are qualified rights. Article 8(1) protects the right to respect for private life, but recognition is given
in article 8(2) to the protection of the rights and freedoms of others. Article 10(1) protects the right to freedom
of expression, but article 10(2) recognises the need to protect the rights and freedoms of others. The effect of
these provisions is that the right to privacy which lies at the heart of an action for breach of confidence has to be
balanced against the right of the media to impart information to the public. And the right of the media to impart
information to the public has to be balanced in its turn against the respect that must be given to private life…..
As Sedley LJ pointed out in Douglas v Hello! Ltd [2001] QB 967, 1004, para 135:
"The European Court of Human Rights has always recognised the high importance of free media of
communication in a democracy, but its jurisprudence does not – and could not consistently with the Convention
itself – give article 10(1) the presumptive priority which is given, for example, to the First Amendment in the
jurisprudence of the United States' courts. Everything will ultimately depend on the proper balance between
privacy and publicity in the situation facing the court."
107 I accept, of course, that the importance which the Court of Appeal attached to the journalistic package finds
support in the authorities. In Jersild v Denmark (1994) 19 EHRR 1, para 31 the European court, repeating what
was said in Observer and Guardian v United Kingdom (1991) 14 EHRR 153, para 59, declared that freedom of
expression constitutes one of the essential foundations of a democratic society and that the safeguards to be
afforded to the press are of particular importance. It then added these comments in para 31:
"Whilst the press must not overstep the bounds set, inter alia, in the interest of 'the protection of the reputation
and rights of others', it is nevertheless incumbent on it to impart information and ideas of public interest. Not
only does the press have the task of imparting such information and ideas: the public also has a right to receive
them. Were it otherwise, the press would be unable to play its vital role of 'public watchdog'."
108 *487 The freedom of the press to exercise its own judgment in the presentation of journalistic material was
emphasised in a further passage in Jersild's case where the court said, at p 26, para 31:
"At the same time, the methods of objective and balanced reporting may vary considerably, depending among
other things on the media in question. It is not for this court, nor for the national courts for that matter, to
substitute their own views for those of the press as to what technique of reporting should be adopted by
journalists. In this context the court recalls that article 10 protects not only the substance of the ideas and
information expressed, but also the form in which they are conveyed."
In Fressoz and Roire v France (1999) 31 EHRR 28, 60, para 54 the court said that in essence article 10 leaves it
for journalists to decide whether or not it is necessary to reproduce material to ensure credibility, adding:
"It protects journalists' rights to divulge information on issues of general interest provided that they are acting in
good faith and on an accurate factual basis and provide 'reliable and precise' information in accordance with the
ethics of journalism."
…110 The need for a balancing exercise to be carried out is also inherent in the provisions of article 10 itself …
…111 Section 12(4) of the Human Rights Act 1998 provides:
"The court must have particular regard to the importance of the Convention right to freedom of expression and,
where the proceedings relate to material which the respondent claims, or which appears to the court, to be
journalistic, literary or artistic material (or to conduct connected with such material), to--(a) the extent to which-
-(i) the material has, or is about to, become available to the public; or (ii) it is, or would be, in the pubic interest
for the material to be published; (b) any relevant privacy code."
But, as Sedley LJ said in Douglas v Hello! Ltd [2001] QB 967, 1003, para 133, you cannot have particular regard
to article 10 without having equally particular regard at the very least to article 8: see also In re S (A Child)
(Identification: Restrictions on Publication) [2004] Fam 43, 72, para 52 where Hale LJ said that section 12(4)
does not give either article pre-eminence over the other. These observations seem to me to be entirely consistent
with the jurisprudence of the European court, as is the following passage in Sedley LJ's opinion in Douglas, at p
1005, para 137:
"The case being one which affects the Convention right of freedom of expression, section 12 of the Human
Rights Act 1998 requires the court to have regard to article 10 (as, in its absence, would section 6). This,
however, cannot, consistently with section 3 and article 17, give the article 10(1) right of free expression a
presumptive priority over other rights. What it does is require the court to consider article 10(2) along with
article 10(1), and by doing so to bring into the frame the conflicting right to respect for privacy. This right,
contained in article 8 and reflected in English law, is in turn qualified in both contexts by the right of others to
*489 free expression. The outcome, which self-evidently has to be the same under both articles, is determined
principally by considerations of proportionality."
It is to be noted too that clause 3(i) of the Code of Practice of the Press Complaints Committee acknowledges
this limitation. It states that a person may have a reasonable expectation of privacy in a public place.
Striking the balance
112 There is no doubt that the presentation of the material that it was legitimate to convey to the public in this
case without breaching the duty of confidence was a matter for the journalists. The choice of language used to
convey information and ideas, and decisions as to whether or not to accompany the printed word by the use of
photographs, are pre-eminently editorial matters with which the court will not interfere. The respondents are
also entitled to claim that they should be accorded a reasonable margin of appreciation in taking decisions as to
what details needed to be included in the article to give it credibility. This is an essential part of the journalistic
exercise.
113 But decisions about the publication of material that is private to the individual raise issues that are not simply
about presentation and editing. Any interference with the public interest in disclosure has to be balanced against
the interference with the right of the individual to respect for their private life. The decisions that are then taken
are open to review by the court. The tests which the court must apply are the familiar ones. They are whether
publication of the material pursues a legitimate aim and whether the benefits that will be achieved by its
publication are proportionate to the harm that may be done by the interference with the right to privacy. The
jurisprudence of the European Court of Human Rights explains how these principles are to be understood and
applied in the context of the facts of each case. Any restriction of the right to freedom of expression must be
subjected to very close scrutiny. But so too must any restriction of the right to respect for private life. Neither
article 8 nor article 10 has any pre-eminence over the other in the conduct of this exercise. As Resolution 1165 of
the Parliamentary Assembly of the Council of Europe (1998), para 11, pointed out, they are neither absolute not
in any hierarchical order, since they are of equal value in a democratic society.
… 123 The same process of reasoning that led to the findings in Peck that the article 8 right had been violated
and by the majority in Aubry that there had been an infringement of the claimant's right to respect for her private
life can be applied here. Miss Campbell could not have complained if the photographs had been taken to show the
scene in the street by a passer-by and later published simply as street scenes. But these were not just pictures of a
street scene where she happened to be when the photographs were taken. They were taken deliberately, in secret
and with a view to their publication in conjunction with the article. The zoom lens was directed at the doorway
of the place where the meeting had been taking place. The faces of others in the doorway were pixelated so as not
to reveal their identity. Hers was not, the photographs were published and her privacy was invaded. The
argument that the publication of the photograph added credibility to the story has little weight. The photograph
was not self-explanatory. Neither the place nor the person were instantly recognisable. The reader only had the
editor's word as to the truth of these details.
124 Any person in Miss Campbell's position, assuming her to be of ordinary sensibilities but assuming also that
she had been photographed surreptitiously outside the place where she been receiving therapy for drug addiction,
would have known what they were and would have been distressed on seeing the photographs. She would have
seen their publication, in conjunction with the article which revealed what she had been doing when she was
photographed and other details about her engagement in the therapy, as a gross interference with her right to
respect for her private life. In my opinion this additional element in the publication is more than enough to
outweigh the right to freedom of expression which the defendants are asserting in this case.’

Extract from Hashman and Harrup v United Kingdom [2000] 30 EHRR 241

2009-05-07T06:21:00.000-07:00

Extract from Hashman and Harrup v United Kingdom [2000] 30 EHRR 241
‘A. As to the existence of an interference with the applicants' freedom of Expression
27. The applicants, "hunt saboteurs", disrupted the Portman Hunt on 3 March 1993. Proceedings were brought
as a result of which they were bound over in the sum of £100 not to breach the peace and to be of good behaviour
for 12 months. [note: ‘binding over
28. The Court recalls that proceedings were brought against the applicants in respect of their behaviour while
protesting against fox hunting by disrupting the hunt. It is true that the protest took the form of impeding the
activities of which they disapproved, but the Court considers nonetheless that it constituted an expression of
opinion within the meaning of Article 10. [FN30]
The measures taken against the applicants were, therefore, an interference with their right to freedom of
expression.
FN30 See, e.g. Steel v. United Kingdom, loc. cit., para. 92.
B. Whether the interference was "prescribed by law"
… 31. The Court recalls that one of the requirements flowing from the expression "prescribed by law" is
foreseeability. A norm cannot be regarded as a "law" unless it is formulated with sufficient precision to enable the
citizen to regulate his conduct. At the same time, whilst certainty in the law is highly desirable, it may bring in its
train excessive rigidity and the law must be able to keep pace with changing circumstances. The level of precision
required of domestic legislation--which cannot in any case provide for every eventuality--depends to a
considerable degree on the content of the instrument in question, the field it is designed to cover and the number
and status of those to whom it is addressed. [FN34]
FN34 See generally in this connection, Rekvenyi v. Hungary: 20 May 1999, para.
34.
32. The Court further recalls that prior restraint on freedom of expression must call for the most careful scrutiny
on its part. [FN35]
FN35 See, in the context of the necessity for a prior restraint, The Sunday Times v. United Kingdom (No. 2),
loc. cit., para. 51.
33. The Court has already considered the issue of "lawfulness" for the purposes of Article 5 of the Convention of
orders to be bound over to keep the peace and be of good behaviour. [FN36] In that case, the Court found that
the elements of breach of the peace were adequately defined by English law. [FN37]
FN36 In Steel v. United Kingdom, loc. cit., paras. 71-77.
FN37 ibid., para. 75.
34. The Court also considered whether the binding-over orders in that case were specific enough properly to be
described as "lawful order[s] of a court" within the meaning of Article 5(1)(b) of the Convention. It noted at
paragraph 76 of the judgment that:
... the orders were expressed in rather vague and general terms; the expression "to be of good behaviour" was
particularly imprecise and offered little guidance to the person bound over as to the type of conduct which would
amount to a breach of the order. However, in each *257 applicant's case the binding-over order was imposed
after a finding that she had committed a breach of the peace.
Having considered all the circumstances, the Court is satisfied that, given the context, it was sufficiently clear
that the applicants were being requested to agree to refrain from causing further, similar, breaches of the peace
during the ensuing 12 months.
The Court also noted that the requirement under Article 10(2) that an interference with the exercise of freedom
of expression be "prescribed by law" is similar to that under Article 5(1) that any deprivation of liberty be
"lawful". [FN38]
FN38 ibid., para. 94.
35. It is a feature of the present case that it concerns an interference with freedom of expression which was not
expressed to be a "sanction", or punishment, for behaviour of a certain type, but rather an order, imposed on the
applicants, not to breach the peace or behave contra bonos mores in the future. The binding-over order in the
present case thus had purely prospective effect. It did not require a finding that here had been a breach of the
peace. The case is thus different from the case of Steel, in which the proceedings brought against the first and
second applicants were in respect of breaches of the peace which were later found to have been committed.
36. The Court must consider the question of whether behaviour contra bonos mores is adequately defined for the
purposes of Article 10(2) of the Convention.
37. The Court first recalls that in its Steel judgment, it noted that the expression "to be of good behaviour" was
particularly imprecise and offered little guidance to the person bound over as to the type of conduct which would
amount to a breach of the order". [FN39] Those considerations apply equally in the present case, where the
applicants were not charged with any criminal offence, and were found not to have breached the peace.
FN39 ibid., para. 76.
38. The Court next notes that conduct contra bonos mores is defined as behaviour which is "wrong rather than
right in the judgment of the majority of contemporary fellow citizens". [FN40] ……..
FN40 See para. 13 above.
40. With specific reference to the facts of the present case, the Court does not accept that it must have been
evident to the applicants what they were being ordered not to do for the period of their binding over. Whilst in
the case of Steel the applicants had been found to have breached the peace, and the Court found that it was
apparent that the bind over related to similar behaviour, [FN43] the present applicants did not breach of the
peace, and given the lack of precision referred to above, it cannot be said that what they were being bound over
not to do must have been apparent to them.
FN43 ibid.
41. The Court thus finds that the order by which the applicants were bound over to keep the peace and not to
behave contra bonos mores did not comply with the requirement of Article 10(2) of the Convention that it be
"prescribed by law".
… 43. It follows that there has been a violation of Article 10 of the Convention.’

Extract from the decision of European Court of Human Rights in CR and SW vs UK (1995) 21 EHRR 245

2009-05-07T06:17:00.000-07:00

Extract
“The applicant maintained that the general common law principle that a husband could not be
found guilty of rape upon his wife, albeit subject to certain limitations, was still effective on 18
September 1990, when he committed the acts which gave rise to the rape charge. A succession
of court decisions before and also after that date for instance on 20 November 1990 in R. v. J
had affirmed the general principle of immunity. It was clearly beyond doubt that as at 18
September 1990 no change in the law had been effected, although one was being mooted....
On 17 September 1990 the Law Commission provisionally recommended that the immunity
rule be abolished. However, the debate was pre-empted by the Court of Appeal's and the
House of Lords' rulings in the case of R. v. R. In the applicant's submission, these rulings
altered the law retrospectively, which would not have been the case had the Law Commission's
proposal been implemented by Parliament.
The Government and the Commission were of the view that by September 1990 there was
significant doubt as to the validity of the alleged marital immunity for rape. This was an area
where the law had been subject to progressive development and there were strong indications
that still wider interpretation by the courts of the inroads on the immunity was probable. In
particular, given the recognition of women's equality of status with men in marriage and
outside it and of their autonomy over their own bodies, the adaptation of the ingredients of the
offence of rape was reasonably foreseeable, with appropriate legal advice, to the applicant. He
was not convicted of conduct which did not constitute a criminal offence at the time when it
was committed.
In addition, the Government pointed out, on the basis of the agreed facts Owen J. had found
that there was an implied agreement between the applicant [CR] and his wife to separation and
to withdrawal of the consent to intercourse. The circumstances in his case were thus covered by
the exceptions to the immunity already stated by the English courts.
The Court notes that the applicant's conviction for rape was based on the statutory offence of
rape in section 1 of the 1956 Act, as further defined in section 1(1) of the 1976 Act. The
applicant does not dispute that the conduct for which he was convicted would have constituted
rape within the meaning of the statutory definition of rape as applicable at the time, had the
victim not been his wife. His complaint under Article 7 of the Convention relates solely to the
fact that in deciding on 18 April 1991 that the applicant had a case to answer on the rape
charge, Rose J. followed the Court of Appeal's ruling of 14 March 1991 in the case of R. v. R
which declared that the immunity no longer existed.
It is to be observed that a crucial issue in the judgment of the Court of Appeal in R. v. R
related to the definition of rape in section 1(1)(a) of the 1976 Act: 'unlawful sexual intercourse
with a woman who at the time of the intercourse does not consent to it'. The question was
whether 'removal' of the marital immunity would conflict with the statutory definition of rape,
in particular whether it would be prevented by the word 'unlawful'. The Court of Appeal
carefully examined various strands of interpretation of the provision in the case law, including
the argument that the term 'unlawful' excluded intercourse within marriage from the definition
of rape. In this connection, the Court recalls that it is in the first place for the national
authorities, notably the courts, to interpret and apply national law. It sees no reason to disagree
with the Court of Appeal's conclusion, which was subsequently upheld by the House of Lords,
that the word "unlawful" in the definition of rape was merely surplusage and did not inhibit
them from 'removing a common law fiction which had become anachronistic and offensive' and
from declaring that 'a rapist remains a rapist subject to the criminal law, irrespective of his
relationship with his victim'.
The decisions of the Court of Appeal and then the House of Lords did no more than continue a
perceptible line of case law development dismantling the immunity of a husband from
prosecution for rape upon his wife. There was no doubt under the law as it stood on 18
September 1990 that a husband who forcibly had sexual intercourse with his wife could, in
various circumstances, be found guilty of rape. Moreover, there was an evident evolution,
which was consistent with the very essence of the offence, of the criminal law through judicial
interpretation towards treating such conduct generally as within the scope of the offence of
rape. This evolution had reached a stage where judicial recognition of the absence of immunity
had become a reasonably foreseeable development of the law.
The essentially debasing character of rape is so manifest that the result of the decisions of the
Court of Appeal and the House of Lords – that the applicant could be convicted of attempted
rape, irrespective of his relationship with the victim – cannot be said to be at variance with the
object and purpose of Article 7 of the Convention, namely to ensure that no-one should be
subjected to arbitrary prosecution, conviction or punishment. What is more, the abandonment
of the unacceptable idea of a husband being immune against prosecution for rape of his wife was
in conformity not only with a civilised concept of marriage but also, and above all, with the
fundamental objectives of the Convention, the very essence of which is respect for human
dignity and human freedom.
Having reached this conclusion, the Court does not find it necessary to enquire into whether
the facts in the applicant's case were covered by the exceptions to the immunity rule already
made by the English courts before 18 September 1990. In short, the Court, like the
Government and the Commission, finds that the Crown Court's decision that the applicant
could not invoke immunity to escape conviction and sentence for rape upon his wife did not
give rise to a violation of his rights under Article 7(1) of the Convention.”

Liversidge v. Anderson [1942] A.C. 206

2009-05-06T08:00:00.000-07:00

Liversidge v. Anderson [1942] A.C. 206 is an important and landmark case in English law which concerned the relationship between the courts and the state, and in particular the assistance that the judiciary should give to the executive in times of national emergency. It concerns civil liberties and the separation of powers. Both the majority and dissenting judgements in the case have been cited as persuasive precedent by various countries of the Commonwealth of Nations. However, in England itself, the courts have gradually retreated from the decision in Liversidge.

Background
Emergency powers in Regulation 18B of the Defence (General) Regulations 1939 permitted the Home Secretary to intern people if he had "reasonable cause" to believe that they had "hostile associations". Sir John Anderson exercised this power in respect of a man called Jack Perlzweig, who used the name Robert Liversidge, committing him to prison but giving no reason.[1] On appeal, the case, joined with that of Ben Greene, reached the House of Lords Judicial Committee (HoLJC), the highest court of appeal.[2] They had to decide whether the court could investigate the objective basis for the reasonable cause; in other words, could they evaluate the Home Secretary's actions on an objective standard, comparing them to that which might be taken by a reasonable man, or were they to measure them against the personal standard of the Secretary?[3]

[edit] Majority judgments
The majority of the Law Lords held that the legislation should be interpreted so as to make effective in the way parliament intended, even if that meant adding to the words to give that effect. Although parliament had made the power subject to a reasonable belief they accepted the Home Secretary's statement that he held such a belief; in otherwise that he believed he had reasonable cause. Viscount Maugham said that the court should "prefer a construction which will carry into effect the plain intention of those responsible " and Lord Macmillan that "it is right so to interpret emergency legislation as to promote rather than to defeat its efficacy". According to him, if the Secretary had acted in good faith, he need not disclose the basis for his decision, nor were his actions justiciable in a court of law.[3]

The majority of the Lords appear to have been greatly concerned with the fact that they were dealing with a matter of national security. In their view, it was not appropriate for a court to deal with matters of national security, especially as they were not privy to classified information that only the executive had.[4]

[edit] Dissenting judgment
The case is most famous for the dissenting speech of Lord Atkin, which has been recognised as a defining statement of the need for courts to remain independent of the executive whatever the prevailing circumstances. In his view the majority had abdicated their responsibility to investigate and control the executive, and were "more executive-minded than the executive". Lord Atkin protested that theirs was "a strained construction put on words with the effect of giving an uncontrolled power of imprisonment to the minister". He went on to say:

“ In England, amidst the clash of arms, the laws are not silent. They may be changed, but they speak the same language in war as in peace. It has always been one of the pillars of freedom, one of the principles of liberty for which on recent authority we are now fighting, that the judges are no respecters of persons and stand between the subject and any attempted encroachments on his liberty by the executive, alert to see that any coercive action is justified in law. ”

Lord Atkin continued:

“ I know of only one authority, which might justify the suggested method of construction. 'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean, neither more nor less'. 'The question is,' said Alice, 'whether you can make words mean so many different things.' 'The question is,' said Humpty Dumpty, 'which is to be the master, that's all.' After all this long discussion, the question is whether the words 'If a man has' can mean 'If a man thinks he has'. I have an opinion that they cannot and the case should be decided accordingly. ”

Lord Atkin's view was that the phrase "reasonable cause" in the statute at hand indicated that the actions of the Secretary were meant to be evaluated by an objective standard (which means, of course, a subjective standard applied by judges). As a result, it would be within the court's purview to determine the reasonableness of the Secretary's actions.[4]

[edit] Aftermath
The potential power of this dissenting judgement was clearly recognised even before it was published. The Lord Chancellor, John Simon, 1st Viscount Simon, wrote to Lord Atkin asking him to amend the proposed terms of the speech. He did not.[5]

Atkin's interpretation has generally been preferred subsequently. In Nakkuda Ali v Jayaratne[6] a strong Privy Council held that Liversidge v. Anderson must not be taken to lay down any general rule on the construction of the expression "has reasonable cause to believe". Subsequently Liversidge v Anderson was described by Lord Reid in Ridge v Baldwin[7] as a "very peculiar decision". Lord Diplock in I.R.C. v Rossminster Ltd[8] thought that "the time has come to acknowledge openly that the majority of this House in Liversidge v Anderson were expediently and, at that time, perhaps, excusably, wrong and the dissenting speech of Lord Atkin was right".

However, in the 1977 deportation case of R v. Secretary of State ex parte Hosenball[9], Lord Denning MR, in the Court of Appeal, supported judicial non-interference with ministerial discretion in matters of national security.[10]

[edit] Commonwealth countries
In the Commonwealth, many jurisdictions, particularly in the Caribbean, have opted to follow Lord Atkin's judgement as well. In A-G of St. Christopher, Nevis and Anguilla v. Reynolds, the Privy Council even went further than Lord Atkin's judgement had intended. Lord Atkin had suggested that a subjective standard would only be applicable if the statute had used phrasings such as "if it appears to the Secretary of State that..." or "where the Secretary of the State is satisfied that..."[4] In this case, however, the Privy Council held that despite the statute's statement that the Governor could detain a person if he was "satisfied" that the person was involved in acts "prejudicial to public safety and order", the statute did not grant unlimited discretion to the Governor; his actions could be evaluated on an objective standard.[11]

In other parts of the Commonwealth such as Singapore and Malaysia, the courts have generally followed the majority decision in Liversidge. In Singapore, the case of Re Ong Yew Teck saw the arrest of a man under the Singaporean Criminal (Temporary Provisions) Ordinance 1955, which granted police officers the power to arrest and detain anyone "whom he has reason to believe that there is ground to justify his arrest and detention under s. 47" of the ordinance. The detainee appealed, arguing that the phrase "has reason to believe" meant that an objective test of reasonableness was to be used, citing Nakkuda Ali. Justice Chua rejected this argument, and accepted the majority decision in Liversidge as persuasive precedent.[12] In Malaysia, the case which established the subjective test of reasonableness for executive actions was Karam Singh v. Menteri Hal Ehwal Dalam Negeri. The case, heard by the Federal Court in 1969, remains as binding precedent in Malaysia. In the case, the appellant had been detained under the Internal Security Act (ISA), but the statement of the Home Minister giving the grounds for his detention provided only one reason, even though his detention order had initially stated there were more. It was argued that the Home Minister had taken a "casual and cavalier" approach to the detention, and that because the allegations against the appellant had been unduly vague, the Home Minister had acted in bad faith, thereby voiding the detention. The court held that the detention was good, because it could not assess the actions of the executive, applying the subjective test of reasonableness as Liversidge had.[13]

In India, the Liversidge decision was cited in Gopalan v. State of Madras, where the court held that the subjective test was to be applied. However, subsequent decisions such as Fazal Ghosi v. State of Uttar Pradesh have allowed some measure of judicial intervention by holding that the executive's decisions must be based on "pertinent material"; if it is found that there is no such material justifying the decision, the courts may act.[14] In some other Commonwealth countries such as Malaysia, it has been attempted to overrule the precedent of Liversidge by citing Indian cases as persuasive precedent; in the case of Karam Singh, the Indian case of Jagannath Misra v. State of Orissa, where the facts were similar, was cited. Legal commentators have noted, however, that the Malaysian judiciary has been reluctant to accept Indian authorities, seeking to distinguish them whenever possible. One Malaysian judge has suggested that "English courts take a more realistic view of things while Indian judges ... impress me as indefatigable, idealists seeking valiantly to reconcile the irreconcilable".[13]

Entick v Carrington (1665)

2009-05-06T07:37:00.000-07:00

Entick v Carrington (1765) 19 Howell's State Trials 1030 is a leading case in English law establishing the civil liberties of individuals and limiting the scope of executive power. The case has also been influential in other common law jurisdictions and was an important motivation for the Fourth Amendment to the United States Constitution.

On 11 November 1762, the King's Chief Messenger Nathan Carrington, and three other King's messengers, James Watson, Thomas Ardran, and Robert Blackmore broke into the home of the Grub-street writer, John Entick (1703?-1773), in the parish of St Dunstan, Stepney, "with force and arms" and seized Entick's private papers. Entick, an associate of John Wilkes, was arrested. Also arrested that day was a lawyer, Arthur Beardmore. The King's messengers were acting on the orders of Lord Halifax, newly appointed Secretary of State for the Northern Department, "to make strict and diligent search for . . . the author, or one concerned in the writing of several weekly very seditious papers intitled, 'The Monitor or British Freeholder, No 357, 358, 360, 373, 376, 378, and 380'".

Entick sought judgment against Carrington and his colleagues who argued that they acted upon Halifax's warrant. A jury returned a special verdict finding that the defendants had broken into Entick's home "with force and arms" and searched for and taken away some of his private papers.

The trial took place in Westminster Hall presided over by Lord Camden, the Chief Justice of the Common Pleas. Camden held that Halifax had no right under statute or under precedent to issue such a warrant. In the most famous passage he stated:

The trial took place in Westminster Hall presided over by Lord Camden, the Chief Justice of the Common Pleas. Camden held that Halifax had no right under statute or under precedent to issue such a warrant. In the most famous passage he stated:

The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good. By the laws of England, every invasion of private property, be it ever so minute, is a trespass. No man can set his foot upon my ground without my license, but he is liable to an action, though the damage be nothing; which is proved by every declaration in trespass, where the defendant is called upon to answer for bruising the grass and even treading upon the soil. If he admits the fact, he is bound to show by way of justification, that some positive law has empowered or excused him. The justification is submitted to the judges, who are to look into the books; and if such a justification can be maintained by the text of the statute law, or by the principles of common law. If no excuse can be found or produced, the silence of the books is an authority against the defendant, and the plaintiff must have judgment.[1]
”

So the individual may do anything but that which is forbidden by law, and the state may do nothing but that which is expressly authorised by law.

The judgment established the limits of executive power in English law, that an officer of the state could only act lawfully in a manner prescribed by statute or common law.

It was also part of the background to the Fourth Amendment to the United States Constitution and was described by the Supreme Court of the United States as a "great judgment, one of the landmarks of English liberty, one of the permanent monuments of the British Constitution,’’ and a guide to an understanding of the Fourth Amendment.[2][3]

Law of Trusts - Computer Marked Assessment III

2009-05-05T05:59:00.000-07:00

No additional materials are provided for the following eight 'knowledge' questions. Please read each question carefully and select an answer from those available.
Question 1
Marks: 1 What is the rule in Milroy v Lord (1861)?
Choose one answer. A. That courts of equity will not enforce bare promises
B. That courts of equity will not generally enforce voluntary covenants
C. That courts of equity will not order the perfection of imperfect gifts
D. That courts of equity will not enforce trusts in favour of volunteer beneficiaires
E. Don't know
Feedback
That's correct.

Although statements (a) and (b) are perfectly correct, they are not rules contained in Milroy v Lord. And statement (d) is plainly wrong. As cases such as Paul v Paul (1882) 20 Ch D 742 demonstrate, the objection is not that the claimant is a volunteer per se, for most trusts have volunteer beneficiaries. The fact that the claimant is a volunteer is only relevant where the trust is not completely constituted, where, in other words, there is no trust, merely a failed attempt to create one.

Correct
Marks for this submission: 1/1.Question 2
Marks: 1 What is a covenant to settle?
Choose one answer. A. A promise by deed to convey rights to the promisee outright
B. A promise by deed to convey rights to the promisee to hold on trust
C. A conveyance of rights to a third party to hold on trust
D. A written promise to convey rights to the promisee to hold on trust
E. Don't know
Feedback
That's correct.

A covenant is a promise in a deed, and a covenant to settle is a promise to set up a trust contained in a deed. Answer (d) is wrong, for though a deed must be written, writing itself is not enough to constitute a deed. Answer (a) is wrong because this is not a promise to create a trust, and answer (c) is wrong because it mentions no promise at all.

Correct
Marks for this submission: 1/1.Question 3
Marks: 1 What is the general attitude of equity to voluntary coventants?
Choose one answer. A. Equity will award damages for breach of a voluntary covenant
B. Equity will decree specific performance of a voluntary covenant
C. Equity will deem a voluntary covenant to have been fully performed
D. Equity will not lend its assistance to the enforcement of a voluntary covenant
E. Don't know
Feedback
That's correct.

The general rule, subject to one exception, is that only promises made for consideration will be enforced in equity, and then only those in which an award of damages is an inadequate remedy.

Correct
Marks for this submission: 1/1.Question 4
Marks: 1 What is the fundamental problem the intended beneficiary normally faces in trying to enforce voluntary covenants to settle?
Choose one answer. A. He is not privy to the deed
B. The deed does not purport to confer a benefit on him
C. The covenant cannot be enforced against a deceased covenantor
D. The intended beneficiary gave no consideration for the promise
E. Don't know
Feedback
That's correct.

Although the promise, because under seal, will be enforceable at law, the intended beneficiary cannot normally (Cannon v Hartley (1949) is exceptional in this regard) enforce it because he will not be privy (party) to it. Answer (b) is wrong, because the deed clearly does purport to confer a benefit on him. Answer (c) is wrong because the death of the covenantor does not extinguish his liablity for non-performance of the covenant; it is perfectly possible to pursue a claim for damages against his estate. Answer (d) is wrong because consideration is not needed for enforcement at law where the promise is contained in a deed.

Correct
Marks for this submission: 1/1.Question 5
Marks: 1 What exception is made in the case of marriage settlements?
Choose one answer. A. That equity will decree specific performance in favour of all intended beneficiaries
B. That equity will make an award of damages in favour of all intended beneficiaries
C. That equity will decree specific performance in favour of those within the marriage consideration
D. That equity will decree specific performance in favour of the next of kin alone
E. Don't know
Feedback
That's correct.

Although equity will not generally lend its aid to enforce a voluntary covenant, it takes a radically different view in the case of marriage settlements where the person seeking to enforce is within the 'marriage consideration'. In such cases, not only will the court decree specific performance, but it will do so even where damages are not an inadequate remedy. Answer (a) is wrong because relief is restricted to those within the marriage consideration. Answer (b) is wrong both for this reason and the further one that the remedy is specific performance, not damages. Answer (d) is wrong because, as re Plumptre's Marriage Settlement (1910) demonstrates, the next of kin will not be granted specific performance of a marriage settlement.

Correct
Marks for this submission: 1/1.Question 6
Marks: 1 What is the 'trust of the covenant' argument?
Choose one answer. A. That the right to sue vested in the covenantees is held on trust for the covenantor
B. That the right to sue vested in the covenantees is held on trust for the intended beneficiary
C. That the damages the covenantees will receive from suing the covenantor for breach of covenant will be held on trust for the intended beneficiary
D. That the covenantor holds the benefit of the covenant on trust for the intended beneficiary
E. Don't know
Feedback
That's correct.

The reason this argument will be made is that if the right is so held, then the intended beneficiary, though still not a beneficiary of a trust of the rights promised to be transferred, is at least the beneficiary of a different trust, a trust of the right to sue for failure to transfer the rights as promised. And given that he is the beneficiary of a completely constituted trust, it matters not that he is a volunteer (Paul v Paul (1882)). Answer (a) is wrong, because this argument would not suit the intended beneficiary. Answer (c) is wrong because this does not give the intended beneficiary what he is seeking, viz a lever to compel the covenantees to sue. Answer (d) is wrong because it is the convenantees, not the covenantor, who have the benefit of the covenant.

Correct
Marks for this submission: 1/1.Question 7
Marks: 1 What do the intended trustees generally have which the intended beneficiaries do not?
Choose one answer. A. They are parties to the covenant and so have a right specific performance
B. They are parties to the covenant and so have a right to damages at law
C. They are within the marriage consideration and so can claim damages in equity
D. They are within the marriage consideration and so can claim specific performance
E. Don't know
Feedback
That's correct.

Answer (a) is wrong, because although the covenantees are party, they will be trying to enforce a voluntary covenant, and equity will not generally lend its aid to the enforcement of such a covenant. However, the absence of consideration is no defence at common law: the fact of the promise being under seal and being enforced by a party to the covenant is enough. That is why (b) is correct. Answers (c) and (d) are both wrong because, even in the case of a marriage settlement, the covenantees will not usually be within the marriage consideration.

Correct
Marks for this submission: 1/1.Question 8
Marks: 1 What is the resulting trust argument which sometimes surfaces in this area?
Choose one answer. A. That any damages recovered by the covenantees in a suit against the covenantor will be held by them on resulting trust for the intended beneficiaires
B. That the rights promised to be transferred are held by the covenantees on resulting trust for the covenantor
C. That the covenantor is a resulting trustee of the rights he has promised to transfer for the intended beneficiaries
D. That the right to sue on the covenant being held by the covenantees on resulting trust for the covenantor, so too will any damages recovered from him in a suit for breach of covenant
E. Don't know
Feedback
That's correct.

Answer (a) is wrong, because a resulting trust is one arising in favour of the transferor of the rights now held on trust, and the intended beneficiaries transferred nothing to the covenantees. Answer (b) is wrong because the rights promised to be transferred have not been transferred at all - that is the very problem the intended beneficiary is trying to overcome. And answer (c) is wrong for the reason that this trust would once again not be a trust arising in favour of the transferor of rights.

Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extract from the judgment of Eve J in re Pryce [1917] 1 Ch 234 and then answer the five questions (Q9 - Q13) that follow.
Context
Under what was a typical marriage settlement, the defendant wife covenanted to convey to covenantees any after-acquired property she might receive to be held by them on trust for her husband and herself for their joint lives, for the survivor for their life, remainder to the children of the marriage (if any), and, in default of issue, remainder to her next-of-kin. This was known as the 'wife's fund'. The husband later gave the defendant a remainder interest he had from his own parents' marriage settlement, which interest vested in possession on the death of his mother. At that point, the defendant had a right to call for a transfer of these rights from the trustees of her husband's parents' marriage settlement to the covenantees/trustees of the 'wife's fund'. In breach of covenant, the defendant left the rights where they were, with the result that they were held for her absolutely. Her husband having now died, and in light of the fact that there were no issue of the marriage and that the only persons who would benefit from a transfer of the rights to the covenantees/trustees were the defendant widow's next of kin, the covenantees/trustees sought directions, inter alia, as to whether they were bound to take steps to enforce the payment and transfer to themselves of the rights currently held in trust for the defendant outright.
Question 9
Marks: 1 How does Eve J paraphrase the question asked by the covenantees?
Choose one answer. A. Whether the covenantees/trustees could be compelled to take steps to recover or enforce payment of transfer to them of the rights concerned
B. Whether the wife's next of kin could sue for breach of covenant
C. Whether the covenantees/trustees ought to take any steps to recover or enforce payment or transfer to them of the rights concerned
D. Whether the wife's next of kin could obtain specific performance of the covenant
E. Don't know
Feedback
That's correct.

The point to notice is that the word 'ought' has here been substituted for 'bound'. For that reason, answer (a) is what Eve J should have asked himself, but unfortunately didn't. And answers (b) and (d) are wrong because the next of kin were not themselves trying to enforce the covenant, either through an award of damages or a grant of specific performance.

Correct
Marks for this submission: 1/1.Question 10
Marks: 1 In relation to the 'wife's fund', what was the relevance of the fact that there were no children of the marriage?
Choose one answer. A. The trust failed and the rights were held on resulting trust for the wife
B. The only person who would gain from performance of the covenant would be the next of kin
C. If there had been children of the marriage, they would have been within the 'marriage consideration' and would have been able to bring an action for specific performance of the covenant
D. Both (b) and (c)
E. Don't know
Feedback
That's correct.

The wife was absolutely entitled to the rights held for her on trust by the trustees of her husband's parents' marriage settlement. By conveying those rights to the trustees of her own marriage settlement, she would thereby reduce her entitlement to a life interest, the remainder going to the next of kin. Given that this was a marriage settlement, had any children been born of her marriage, they would have been within the marriage consideration and so able to enforce the covenant in equity: Pullan v Koe (1913). No such right, however, is given to the next of kin: re Plumptre's Marriage Settlement (1910). Answer (a) is wrong, because the trust provided beneficiaries in case of failure of issue, viz the next of kin.

Correct
Marks for this submission: 1/1.Question 11
Marks: 1 If there had been children of the marriage, what effect would that have had so far as any trusts were concerned?
Choose one answer. A. None - there would be no trust until the rights in question were transferred to the covenantees
B. A constructive trust would arise in favour of the next-of-kin
C. A constructive trust of the defendant's interest would arise in favour of the children
D. None of the above
E. Don't know
Feedback
That's correct.

Since the covenant would now be specifically enforceable, application of the maxim that 'equity looks upon that as done which ought to be done' would generate a construcitve trust in favour of the children. Answer (a) is therefore wrong, and answer (b) is untenable because the next of kin could only take where there were no issue.

Correct
Marks for this submission: 1/1.Question 12
Marks: 1 What, according to Eve J, was the effect of the Judicature Act?
Choose one answer. A. That the same defences to a claim in equity could now be opposed to a claim at law
B. There was now only one court, and in it the rules of equity prevailed
C. All trusts were now executed, with the rights of the trustees now being vested in their beneficiaries
D. That voluntary covenants were now enforceable in equity
E. Don't know
Feedback
That's correct.

Answer (b) is the view of Sir George Jessel MR in Walsh v Lonsdale, not that of Eve J in this case, answer (c) would mean that our entire subject no longer existed, and answer (d) is the exact opposite of what Eve J was saying.

Correct
Marks for this submission: 1/1.Question 13
Marks: 1 Why did Eve J order that the trustees ought not to take any action to enforce the covenant?
Choose one answer. A. Because any damages awarded at common law would be nominal
B. Because any damages would be held on resulting trust for the wife
C. Because it would give the next of kin by indirect means relief they could not obtain by any direct procedure
D. Because the next of kin were not party to the covenant
E. Don't know
Feedback
That's correct.

Answers (a) and (b) are wrong for the simple reason that these issues were not addressed in Eve J's judgment. Answer (d) is true, but irrelevant, the issue being the position of the covenantees, who were, of course, party to the covenant.

Correct
Marks for this submission: 1/1.Application
Please consider the following fact scenario, then answer the four examination questions (Q14 - Q17) that follow:

Fred covenanted with Ella that he would convey £50,000 from the £100,000 currently in his account with the London Bank plc and any earnings he might receive from a book he was about to publish to her to hold on trust for Peter. Although he later earned £1,000,000 in royalties from the sale of his book, Fred failed to keep either promise.
Question 14
Marks: 1 What is the relevance of the fact that the covenant concerns royalties in respect of a book not yet written?
Choose one answer. A. It is not possible to have a trust of after-acquired property
B. The royalties would be after-acquired property, and according to re Cook, no trust of the covenant is possible in such circumstances
C. Rights to after-acquired property are incapable of assignment and so cannot be transferred to Ella
D. There is no certainty of subject-matter with after-acquired property
E. Don't know
Feedback
That's correct.

It was for this reason that Buckley J refused to countenance the idea that the covenantees held the benefit of the covenant on trust for the intended beneficiary. You should note that his reasoning in this regard is extremely contentious. And though (a) is perfectly correct, no-one is saying that there is a present trust of the royalties. Answer (c) is not the right answer, for though true, no attempt was made by Fred to convey to Ella the right to receive the royalties. And answer (d) is wrong because the issue is not one of uncertainty of subject-matter but of no subject-matter at all.

Correct
Marks for this submission: 1/1.Question 15
Marks: 1 What would Peter need to establish before he could sue for breach of covenant?
Choose one answer. A. That he could sue on the covenant by virtue of the Contracts (Rights of Third Parties) Act 1999
B. That the right to sue on the covenant was held for him on trust
C. That this was a marriage settlement and he was within the marriage settlement
D. Either (a) or (c)
E. Don't know
Feedback
Answer (d) is correct.

There are two ways in which Peter could sue in his own right. The first, which is doubtful, is that the 1999 Act applies to voluntary covenants and that he is able to invoke the Act. If both those questions are answered affirmatively, then Peter would be able to sue for damages at law. Second, where the requirements of a marriage settlement are present, in which case Peter will be able to obtain specific performance in equity. Answer (c) is not strictly correct, for the right to sue in such case would be vested in Ella, not Peter. However, in such circumstances, Peter could compel Ella to bring a claim, and, if she refused, in certain circumstances bring the claim himself in her name.

Incorrect
Marks for this submission: 0/1.Question 16
Marks: 1 What barrier does re Pryce present to Ella, who is considering suing Fred for breach of covenant?
Choose one answer. A. That the court will direct her not to sue Fred
B. That the court, if asked for directions, will direct her not to sue Fred
C. That the court will only direct her to sue Fred if it finds that she holds the right to sue on trust for Peter
D. That even if she does sue, the damages she will obtain will be nominal
E. Don't know
Feedback
That's correct.

Answer (a) is wrong because Eve J said nothing at all about the situation in which the covenantee simply goes ahead and sues without asking. Answer (c), though arguably what Eve J should have said in re Pryce, was not part of his reasoning at all. And answer (d), though one of the arguments put forward to defend the result, though not the reasoning, in re Pryce, again formed no part of the reasoning of Eve J.

Correct
Marks for this submission: 1/1.Question 17
Marks: 1 Which of the following arguments could NOT be made to show that re Pryce was wrongly decided?
Choose one answer. A. That Eve J mistook the effect of the Judicature Acts
B. That Eve J wrongly held that the right to sue was not held on trust for the next of kin
C. That Eve J answered a different question to that from which he was asked
D. That the fact that the next of kin could not sue in their own right had no bearing on the covenantees' right to do the same
E. Don't know
Feedback
That's correct.

Answer (b) was a point which was unfortunately not addressed in Eve J's judgment. All of (a), (c), and (d) are perfectly legitimate arguments to make against the correctness of Eve J's judgment.

Correct
Marks for this submission: 1/1.

EXTRACT FROM JUDGMENT OF EVE J IN re PRYCE [1917] 1 Ch 234

2009-05-05T05:45:00.000-07:00

EVE J. These proceedings have been instituted by the plaintiffs, the present trustees of the settlement executed on the marriage in 1887 of the late Mr Pryce Meyrick Pryce with the defendant, who is now his widow, with the object ... of having it determined whether, in the events which have happened, the trustees ought to take any steps to recover or enforce payment or transfer to them of such, if any, of the said premises as the Court shall hold to have been caught by the said covenant or agreement respectively. ...
The interests given by the husband to the wife, and the husband's one-third share of the £4700 ... have only fallen into possession on the recent death of the husband's mother, and are still outstanding in the trustees of the parents' marriage settlement and in the trustees of the deed of family arrangement respectively. The question I have to decide is whether the plaintiffs as trustees of the marriage settlement ought to take steps to obtain transfer and payment to them of these premises. ...
The position of the wife's fund is ... that her next of kin would be entitled to it on her death; but they are volunteers, and although the Court would probably compel fulfilment of the contract to settle at the instance of any persons within the marriage consideration (see per Cotton LJ in In re D'Angibau), and in their favour will treat the outstanding property as subjected to an enforceable trust (Pullan v Koe), "volunteers have no right whatever to obtain specific performance of a mere covenant which has remained as a covenant and has never been performed": see per James LJ in In re D'Angibau. Nor could damages be awarded either in this Court, or, I apprehend, at law, where, since the Judicature Act, the same defences would be available to the defendant as would be raised in an action brought in this Court for specific performance or damages.
In these circumstances, seeing that the next of kin could neither maintain an action to enforce the covenant nor for damages for breach of it, and that the settlement is not a declaration of trust constituting the relationship of trustee and cestui que trust between the defendant and the next of kin, in which case effect could be given to the trusts even in favour of volunteers, but is a mere voluntary contract to create a trust, ought the Court now for the sole benefit of these volunteers to direct the trustees to take proceedings to enforce the defendant's covenant? I think it ought not; to do so would be to give the next of kin by indirect means relief they cannot obtain by any direct procedure, and would in effect be enforcing the settlement as against the defendant's legal right to payment and transfer from the trustees of the parents' marriage settlement. The circumstances are not unlike those which existed in the case of In re D'Angibau, and I think the position here is covered by the judgments of the Lords Justices in that case.
Accordingly, I declare that the trustees ought not to take any steps to compel the transfer or payment to them of the premises assured to the wife by the deed of December 12, 1904.

Trust Law - Computer Marked Assessment II

2009-05-05T05:33:00.000-07:00

No additional materials are provided for the following seven 'knowledge' questions. Please read each question carefully and select an answer from those available.
Question 1
Marks: 1 What is the main difference between a discretionary trust and a power of appointment under a trust instrument?
Choose one answer. A. Discretionary trusts always give the trustees a discretion as to who will receive the property, whereas powers of appointment can involve only one object
B. Powers of appointment are always to appoint capital, whereas discretionary trusts can be trusts of income
C. Discretionary trusts must be executed, whereas powers of appointment need not be exercised
D. Objects of a discretionary trust have vested interests in the trust property; objects of powers of appointment do not
E. Don't know
Feedback
The correct answer is (c).

The use of the terminology of 'trust' and 'power' generally aims to indicate the distinction between trustees' duties, and 'mere' powers which they have, which they need not exercise. While (a) is correct, it is not the main difference between the two: a trust with one object is still a trust, which a trustee must carry out, but it is a fixed trust, not a discretionary one. (b) is false: powers to appoint income are common. (d) is false as well. Neither objects of a discretionary trust nor objects of a power of appointment are regarded as having vested interests in the trust property.

Incorrect
Marks for this submission: 0/1.Question 2
Marks: 1 What is a dispositive power?
Choose one answer. A. It is a power to deal with or affect the beneficial interests in the trust property
B. It is a power to invest the trust property
C. It is a power to insure the trust property
D. It is a power to appoint new trustees
E. Don't know
Feedback
That's correct.

'Dispositive' powers are those by which the trustee 'disposes' of the trust property, which in this context means 'distributes' the trust property, i.e. to the trusts objects. It is standardly used in contrast to 'administrative powers, powers such as the power of investment, the power to insure the trust property, the power to appoint new trustees and so on. These administrative powers do not affect the beneficial interests of the objects -- they merely allow the trustee properly to manage the trust while it is in operation. Answers (c) and (d) are wrong as these are clearly administrative powers. Answer (b) is wrong for the same reason, but note that the way a trustee invests the trust funds can work to favour beneficiaries with income interests over the capital beneficiaries, or vice versa, so the power (and duty) to invest the trust funds is overlaid with a fiduciary duty to invest in an even-handed way (see the study guide 4.4).

Correct
Marks for this submission: 1/1.Question 3
Marks: 1 Which of the following statements about fiduciary duties is true?
Choose one answer. A. Only trustees can have fiduciary duties under a trust
B. All trustee duties are fiduciary duties
C. A fiduciary duty requires the trustee to act in the best interests of the beneficiaries
D. A fiduciary duty regulates trustees so they can act in conflict of interest
E. Don't know
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That's correct.

Answer (a) is wrong because, for example, other persons besides the trustee may have fiduciary powers under the trust; for example, a settlor may give himself a power to direct the trustee investments, and this power is likely to be fiduciary, i.e. must be exercised in the best interests of the beneficiaries. Answer (b) is incorrect, because trustees have duties of care and skill, for example in the investment of the trust funds, and duties of care and skill are not fiduciary duties, for they do not concern the trustees loyalty to the beneficiaries, but his competence. Answer (c) correctly gives the standard formulation of the fiduciary duty. Answer (d) is wrong because fiduciary duties prohibit trustees from acting in conflict of interest; they do not positively provide a framework whereby a trustee can do so.

Correct
Marks for this submission: 1/1.Question 4
Marks: 1 In which of the following situations does a fraud on a power take place?
Choose one answer. A. The trustee gives Mark £3000 on condition that he splits it with his sister, who is not an object of the power
B. The trustee gives Frank £2000 under a power of appointment on condition that Frank finishes his university studies
C. At Alison's request, the trustee gives Alison £5000 under a power of appointment so that Alison can set up a trust for her children, who are not objects of the power
D. Both (a) and (c)
E. Don't know
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The correct answer is (d).

Answer (a) is a paradigm example of a fraud on a power, for here the condition requires Mark, a proper object of the power, to direct the appointed property into the hands of someone who is not a proper object, and in answer (c) the exercise of the power is intended to place the trust money in the hands of non-objects; it doesn't matter if this fraud is instigated by a proper object of the power; it is still a fraud on the power. Answer (b) is incorrect because it is not fraudulent for a trustee merely to impose conditions on his exercise of the power, so long as he acts in the best interests of the beneficiaries. Answer (d) is incorrect; while a breach of trust, a mistaken exercise of an investment power is not fraudulent.

Incorrect
Marks for this submission: 0/1.Consider the following testamentary trust provision, which would be typical in a family trust of the 19th century.

"The rest and residue of my estate on trust for my wife Marjorie for life, and then to my children in such shares as my trustees shall in their absolute discretion see fit, with power to my trustees to appoint up to half the capital during the life of my said wife to such of my children as they shall in their absolute discretion think fit"
Questions 5 to 7 relate to this provision.
Question 5
Marks: 1 Which statement best describes the positions of the objects under this provision?
Choose one answer. A. Marjorie and the children are all discretionary beneficiaries
B. Marjorie has an income interest, the children each have a discretionary capital interest, and the children are each objects of a power of appointment of capital
C. Marjorie has an income interest and the children are the objects of a power of appointment of the income, and of a capital interest in remainder
D. Marjorie has a fixed interest and the children are beneficiaries of a discretionary trust
E. Don't know
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The correct answer is (b).

Answer (a) is wrong because Marjorie has a fixed interest in the income. While, if the power to appoint capital is exercised, there will be less capital upon which income can be earned, the appointment does not alter her interest. Answer (c) is wrong because the power of appointment is of capital, not income. Answer (d) is correct as far as it goes, but it doesn't mention that the children are also objects of the power of appointment.

Incorrect
Marks for this submission: 0/1.Question 6
Marks: 1 Who are the persons who take in default of appointment under this provision?
Choose one answer. A. The children
B. Marjorie
C. The children in such shares as the trustee selects
D. Marjorie and the children
E. Don't know
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That's correct.

Answer (a) is close, but (c) is better; if the power of appointment is not exercised, then the trustee will have all of the capital to distribute amongst the children, but as objects of a discretionary trust, each child has only a 'mere hope' or mere spes (latin for hope) of getting any property. So they take in default of appointment as a discretionary class. Answers (b) and (d) are wrong because Marjorie cannot take any of the capital whether the power is exercised or not. If you thought (d) because Marjorie is better off if the capital is not appointed, because more capital in the fund is likely to mean more income, then you were on the right track, but is technically wrong because Marjorie's income interest is not altered in any way if capital is appointed; it's just that her interest is less valuable now, depending upon a smaller pool of capital.

Correct
Marks for this submission: 1/1.Question 7
Marks: 1 In practical terms, which statement best describes the purpose behind the provision?
Choose one answer. A. To provide for Marjorie during her life, and then to provide for the children, but if Marjorie antagonises the trustees they can use the power of appointment to reduce her income
B. To provide as much as possible for the children, while giving Marjorie some income during her life
C. To give Marjorie the benefit of the property for her life, but with the possibility of benefiting the children during her life if they are well behaved
D. To provide for Marjorie during her life, and then to provide for the children on her death, but to allow the trustees to give the children the benefit of the capital early depending on the circumstances of Marjorie and the children
E. Don't know
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That's correct.

The purpose of such a provision is to allow flexibility. The settlor's first concern is to provide for his widow for as long as she lives, and then allow the trustee to distribute the capital to the children in whatever shares seem sensible at the time of his widow's death. For example, one child might already have made a fortune, while another is poor. The discretionary trust of capital allows the trustee to give unequal amounts depending upon the circumstances at the time. The power of appointment, to appoint up to half the capital, gives further flexibility. If for example, the income from the fund is large, and more than enough to meet Marjorie's needs, but the children could benefit from the capital while she is still alive, for example if one was getting married or was starting a business, the power allows the trustee to give one or more children the benefit of some of the capital without having to wait until Marjorie dies.

Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extracts from the speeches of Lord Hodson (dissenting) and Lord Wilberforce in McPhail v Doulton [1971] AC 424 and then answer the six questions (Q8 - Q13) that follow. Question 8
Marks: 1 How does Lord Hodson explain the principle stated by Lord Eldon in Morice v Bishop of Durham?
Choose one answer. A. Where a trust has too many beneficiaries, the court cannot control the trust
B. The court must be able to distribute the trust property equally amongst the beneficiaries
C. If the beneficiaries cannot be ascertained the court cannot control the trust, and it is void for uncertainty
D. Too many beneficiaries makes a trust void for uncertainty
E. Don't know
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That's correct.

Answers (a) and (d) are wrong because the issue is not one of absolute numbers, but whether each beneficiary can be identified. Where the beneficiaries cannot each be identified, the trustee's duty to distribute is uncertain, and thus the court cannot control the execution of the trust. Answer (b) is not relevant at this point, for that concerns the way in which a court might execute a trust where the beneficiaries can all be identified.

Correct
Marks for this submission: 1/1.Question 9
Marks: 1 Why did Lord Hodson think that the court has no power to authorise a scheme of distribution where not all the beneficiaries are acsertainable?
Choose one answer. A. Such a scheme would allow the court to distribute amongst a class not chosen by the settlor
B. Such a scheme would violate the maxim 'equality is equity'
C. Such a scheme would be impractical to administer
D. Such a scheme would interfere with the trustee's discretion
E. Don't know
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That's correct.

Answers (b), (c) and (d) are wrong; Lord Hodson doesn't mention them in the passage where he discusses this. Lord Hodson quotes Lord Upjohn in Re Gulbenkian for the proposition that the settlor did not confer upon the trustee any discretion to choose only amongst a subset of the class he intended, in particular only amongst the identifiable beneficiaries, leaving those who are not ascertained out of his consideration. Thus if a court were to propose a scheme of distribution amongst only the beneficiaries that were ascertainable, the scheme would distribute to a class that the settlor had not chosen. In such a case, the court would not be carrying out the settlor's trust, but a different trust of its own devising.

Correct
Marks for this submission: 1/1.Question 10
Marks: 1 Which of the following reasons does Lord Wilberforce give for his claim that the distinction between powers and duties is 'narrow', and in a sense, 'artificial'?
Choose one answer. A. A trustee will have fiduciary duties in respect of both
B. A trustee has an obligation to exercise both powers and duties
C. In practical terms, a trustee will decide whether to exercise a power or exercise his discretion under a discretionary trust in much the same way
D. Both (a) and (c)
E. Don't know
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That's correct.

Review the three paragraphs beginning with 'Before dealing with these two questions....' and locate the reasons given in (a) and (c). Answer (b) is wrong because, not only does Lord Wilberforce not suggest it as a reason, but his speech does not intend to assimilate powers with duties per se, so that powers of appointment are discretionary trusts; rather, his argument is that trusts, like powers, can still be carried out even though the class of beneficiaries contains some unascertainable members.

Correct
Marks for this submission: 1/1.Question 11
Marks: 1 What, in practical terms, is the main difference between how a trustee will give effect to a discretionary trust and a power of appointment, according to Lord Wilberforce?
Choose one answer. A. The trustee must try to equalise the benefit amongst beneficiaries in the case of a trust
B. In the case of a trust, each benefiary must get something
C. In the case of a power of appointment, the trustee needn't consider using the power at all
D. The trustee must carry out a wider and more systematic survey of the objects in the case of a trust
E. Don't know
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That's correct.

Answers (a) and (b) are both wrong, and there is nothing in Lord Wilberforce's judgment to suggest otherwise. Answer (c) is wrong, as Lord Wilberforce specifically requires a trustee holding a power of appointment to consider exercising it from time to time.

Correct
Marks for this submission: 1/1.Question 12
Marks: 1 In the case of a discretionary trust where the trustees fail or refuse to carry out the trust, which of the following is not a means that Lord Wilberforce says the court can employ to execute the trust?
Choose one answer. A. The court can appoint new trustees
B. If an appropriate method of distributing the trust property is apparent to the court, it can order the distribution of the property itself
C. The court can order the trustee to distribute the property as equally as possible amongst most of the beneficiaries
D. The court can call on the representative beneficiaries to prepare a scheme by which the trust assets can be distributed, and order that distribution
E. Don't know
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That's correct.

The methods of execution in (a), (b), and (d) are all illustrations Lord Wilberforce gives to show that 'the court, if called upon to execute the trust power, will do so in the manner best calculated to give effect to the settlor's or testator's intentions.' The means of distribution outlined in answer (c) is not acceptable; indeed, Lord Wilberforce denies that a distribution of the fund on the basis that 'equality is equity' is sensible in this context, for it is likely to be the last thing the settlor intended.

Correct
Marks for this submission: 1/1.Question 13
Marks: 1 What, according to Lord Wilberforce, would give rise to 'administrative unworkability'?
Choose one answer. A. The words describing the objects of the trust are too vague
B. The definition of the class is so wide as not to describe a class of objects at all
C. The whereabouts of the beneficiaries is unknown
D. The class of objects is uncertain
E. Don't know
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That's correct.

Answers (a) and (d) are wrong because administrative workability is not, about the use of vague words or uncertainty in general. Nor, as against answer (d), does it have to do with finding out where the beneficiaries are. Administrative unworkability is a difficult concept, but seems to be related not to certainty of objects per se, but to the problem any trustee would have in distributing the funds if the class chosen, such as all ther residents of greater London, doesn't seem to give the trustee any idea as to how he is to choose one object over another in distributing the trust property.

Correct
Marks for this submission: 1/1.Application
Please answer the following two examination questions (Q14 and Q15):
Question 14
Marks: 1 Consider the following testamentary provision: 'I hereby give £1m on trust to my trustees to distribute within 10 years to anyone in the world except to the trustee, any employee of the trustee or relation of the trustee, or to anyone in my immediate family.'

Which statement best explains the validity or invalidity of this provision?

Choose one answer. A. This is a power of appointment that is uncertain on the 'is or is not' test
B. This is a discretionary trust that is certain on the 'is or is not' test
C. This is a power of appointment that fails for administrative unworkability
D. This is a discretionary trust that fails for administrative unworkability
E. Don't know
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That's correct.

Answers (a) and (c) are wrong because this provision is framed imperatively, 'on trust... to distribute'. This imposes a duty, not a mere power which the trustee can exercise or not as he chooses. (b) is correct as far as it goes, though there may be queries to be made about the conceptual certainty of the term 'relation' or 'relative' (see Re Baden No. 2 [1973] Ch. 9). But it does not recognise the problem which is stated in answer (d), which is that the beneficial class here is everyone in the world except an excluded group. This would seem to fall within a class description 'so hopelessly wide' as not to indicate any true class of objects at all.

Correct
Marks for this submission: 1/1.Question 15
Marks: 1 Consider the following testamentary provision: '£1m for distribution to persons in Wales who have had coal miners in their family for three generations'

The validity of this provision will turn on whether...

Choose one answer. A. 'in their family for three generations' is sufficiently certain to define a class
B. it creates a discretionary trust or a power of appointment
C. it is administratively unworkable
D. whether a complete list of mining families in Wales can be drawn up
E. Don't know
Feedback
That's correct.

Answer (a) is correct because it is not clear what having coal miners 'in the family for three generations' means: does a person who only has distant cousins who were miners count? Answer (b) is wrong because the same test of validity, the 'is or is not' test, will apply to both. Answer (c) is wrong because adminstrative unworkability does not seem to be a problem here; the class appears to be a sensible one; clearly the settlor has some emotional attachment to miners and their families and wished to benefit those who had a long association with the industry. Answer (d) is wrong because it suggests the 'complete list' test for certainty applies, but McPhail v Doulton decided that it doesn't.

Correct
Marks for this submission: 1/1.

Extracts from the speeches of Lord Hodson (dissenting) and Lord Wilberforce in McPhail v Doulton [1971] AC 424

2009-05-05T05:04:00.000-07:00

Extracts from the speeches of Lord Hodson (dissenting) and Lord Wilberforce in McPhail v Doulton [1971] AC 424
(Brief facts: The case concerned the interpretation and validity of the following provisions in a trust instrument:
"9. (a) The trustees shall apply the net income of the fund in making at their absolute discretion grants to or for the benefit of any of the officers and employees or ex-officers or ex-employees of the company or to any relatives or dependants of any such persons in such amounts at such times and on such conditions (if any) as they think fit and any such grant may at their discretion be made by payment to the beneficiary or to any institution or person to be applied for his or her benefit and in the latter case the trustees shall be under no obligation to see to the application of the money. (b) The trustees shall not be bound to exhaust the income of any year or other period in making such grants as aforesaid …
"10. All benefits being at the absolute discretion of the trustees, no person shall have any right title or interest in the fund otherwise than pursuant to the exercise of such discretion, and nothing herein contained shall prejudice the right of the company to determine the employment of any officer or employee."
The first issue the court addressed was whether the provision created a trust, i.e. imposed a duty on the trustee to distribute this property to the class specified, or merely a power to do so. Their Lordships unanimously decided a trust was intended; the question then was whether the trust was certain. Lord Hodson (dissenting) held that a trust would be invalid unless each object was ascertainable, i.e. identifiable. In other words, unless one had or could come up with a complete list of the objects, the trust would fail. Lord Wilberforce, for the majority, held that a trust would be valid if for any individual it could be said whether he was or was not within the class of objects indicated framed by the settlor's words. Prior to this decision, the 'is or is not' test was regarded as the correct test for the validity of powers of appointment, but not for discretionary trusts, for which the 'complete list' test was the test for certainty of objects)
LORD HODSON (dissenting)
There remains the vexed question, much canvassed before your Lordships not only in this case but in In re Gulbenkian's Settlements (Whishaw v. Stephens) [1970] A.C. 508, as to the distinction, if any, between trusts and bare powers in favour of a class of persons when the court has to consider whether a disposition fails by reason of uncertainty.
Of late years a number of dispositions have been considered by the courts in which donors have sought to make elaborate provisions in favour of beneficiaries including such persons as the employees of limited companies and their wives and widows. Such a case was Inland Revenue Commissioners v. Broadway Cottages Trust decided in the Court of Appeal and reported in [1955] Ch. 20. It was there recognised that the accepted test of the validity of a trust was that it must be such as the court can control. The authority for this proposition is to be found in Morice v. Bishop of Durham (1805) 10 Ves.Jr. 522 as stated by Lord Eldon, where he said, at pp. 539, 540:
"As it is a maxim, that the execution of a trust shall be under the control of the court, it must be of such a nature, that it can be under that control; so that the administration of it can be reviewed by the court; or, if the trustee dies, the court itself can execute the trust: a trust therefore, which, in case of maladministration could be reformed; and a due administration directed; and then, unless the subject and the objects can be ascertained, upon principles, familiar in other cases, it must be decided, that the court can neither reform maladministration, nor direct a due administration."
In a sentence there is no trust over which the court cannot assume control. If the inability arises from inability to ascertain the objects of the alleged trust, it is said to be void for uncertainty.
…
The distinction between a trust and a mere power can be stated shortly although the short statement will require some explanation. It is that where there is a trust there is a duty imposed upon the trustees who can be controlled if necessary in the exercise of their duty. Whether the trust is discretionary or not the court must be in a position to control its execution in the interests of the objects of the trust. Where there is a mere power entirely different considerations arise. The objects have no right to complain. Where by the instrument creating the power the discretion is made absolute and uncontrollable the court cannot interfere (Gisborne v. Gisborne (1877) 2 App.Cas. 300). The trust in default controls and he to whom the trust results in default of exercise of the power is in practice the only one competent to object to a wrongful exercise of the power by the donee. Counsel did not profess to know of any successful application to the court by a person claiming to be an apparent object of a bare power. I exclude from consideration cases in which bad faith may be alleged.
…
In the Gulbenkian case [1970] A.C. 508 the majority of your Lordships held the view that where there is a valid gift over in default of appointment a mere or bare power of appointment among classes is valid if it can be said with certainty whether any given individual is or is not a member of a class and that the power did not fail simply because of the impossibility of determining every member of the class.
In my opinion a mere power is a different animal from a trust and the test of certainty in the case of trusts which stems from Morice v. Bishop of Durham, 10 Ves.Jr. 522 is valid and should not readily yield to the test which is sufficient in the case of mere powers.
The unhappy results which may follow from incompetent drafting may be, in the case of an instrument held to impose a trust, that it is so much waste-paper, whereas in the case of an instrument differing perhaps on the face of it very little from the invalid trust instrument a good gift of a power to benefit objects may emerge. Thus it is said that in order to avoid fine distinctions the test should be the same for both.
One persuasive argument used is that, in applying the principle that where there is a trust the court must be in a position to exercise it, the court cannot exercise the trustees' discretion in the event of their failing to do so. The discretion being conferred on and exercisable by the trustees alone, the court cannot do other than authorise a distribution in equal shares. This, in cases comparable with the present, must lead to a result tending towards absurdity and makes the strict test of certainty open to serious criticism. This disability of the courts to exercise the discretion reposed in trustees was referred to in the recitation of the argument for the Crown in the
judgment of the court in the Broadway Cottages Trust case [1955] Ch. 20, 30. It was not referred to specifically in the conclusion reached by the court although it would be fair to say that the arguments of the Crown set out in the judgment were implicitly accepted. For myself I do not deny that there is force in the argument based on the absurdity of an equal division especially as it has not always been accepted.
In what are called the relations cases, Mosely v. Moseley (1673) Fin. 53, Clarke v. Turner (1694) Free.Ch. 198 and Warburton v. Warburton (1702) 4 Bro.P.C. 1, the court did exercise its own discretionary judgment against equal division. Similarly, in a different context the same principle was applied in the case of Richardson v. Chapman (1760) 7 Bro.P.C. 318, where it appears from the reported argument that the court decreed the proper act to be done not by referring the matter to the trustee's discretion but by directing him to perform as a mere instrument the thing decreed (pp. 326-327). These cases may be explained as cases where there were indications which acted as pointers or guides to the trustees and enabled the court to substitute its own discretion for that of the trustees.
This practice, however, has fallen into desuetude and the modern, less flexible, practice has, it appears, been followed since 1801, when Sir Richard Arden M.R. in Kemp v. Kemp (1801) 5 Ves.Jr. 849 stated that the court now disclaims the right to execute a power and gives the fund equally. The basis of this change of policy appears to be that the court has not the same freedom of action as a trustee and must act judicially according to some principle or rule and not make a selection giving no reason as the trustees can. The court, it is said, is driven in the end to the principle that equity is equality unless, as in the relations cases, the court finds something to aid it. Where there is no guide given the court, it is said, has no right to substitute its own discretion for that of the designated trustees. …
I have had the advantage of reading the speech which has been prepared by my noble and learned friend Lord Wilberforce, whose opinion particularly on this topic is of very strong persuasive power. I cannot, however, bridge the gulf which still, I think, yawns between us. If one bases oneself, as I do, on the passage from Lord Eldon's judgment in Morice v. Bishop of Durham, 10 Ves.Jr. 522, 540 as defining the features of a trust, it is, in my opinion, impermissible to sanction, in the case of an uncertain disposition in the sense of the passage quoted, the authorisation by the court of a scheme of distribution such as he suggests. I cannot accept that this is justified by stating that a wider range of inquiry is called for in the case of trust powers than in the case of powers (meaning "mere" as opposed to "trust powers"). To adopt this solution is, I think, to do the very thing which the court cannot do. As was pointed out by my noble and learned friend Lord Upjohn in the Gulbenkian case [1970] A.C. 508, 524:
"The trustees have a duty to select the donees of the donor's bounty from among the class designated by the donor; he has not entrusted them with any power to select the donees merely from among claimants who are within the class, for that is constituting a narrower class and the donor has given them no power to do this."
I have read and re-read the speech of my noble and learned friend Lord Wilberforce with, I hope, a readiness to change my mind and to temper logic with convenience, but having given the best consideration I can to the problem, I still adhere to the view I have previously expressed
in the Broadway Cottages case [1955] Ch. 20 and in the Gulbenkian case [1970] A.C. 508 as to the requirements for certainty in the case of the objects of a trust.
…
LORD WILBERFORCE
My Lords this appeal is concerned with the validity of a trust deed dated July 17, 1941, by which Mr. Bertram Baden established a fund for the benefit, broadly, of the staff of the respondent company, Matthew Hall Co. Ltd. Mr. Baden died in 1960 and the appellants are the executors of his will. They claim that the trust deed is invalid and that the assets transferred to the trustees by their testator revert to his estate. The trusts established by the deed are of a general type which has recently become common, the beneficiaries including a wide class of persons among whom the trustees are given discretionary powers or duties of distribution. It is the width of the class which in this and in other cases before the courts has given rise to difficulty and to the contention that the trusts are too indefinite to be upheld.
The trust deed begins with a recital that the settlor desired to establish a fund for providing benefits for the staff of the company and their relatives or dependants. …
In this House, the appellants contend, and this is the first question for consideration, that the provisions of clause 9 (a) constitute a trust and not a power. If that is held to be the correct result, both sides agree that the case must return to the Chancery Division for consideration, on this footing, whether this trust is valid. But here comes a complication. In the present state of authority, the decision as to validity would turn on the question whether a complete list (or on another view a list complete for practical purposes) can be drawn up of all possible beneficiaries. This follows from the Court of Appeal's decision in Inland Revenue Commissioners v. Broadway Cottages Trust [1955] Ch. 20 as applied in later cases by which, unless this House decides otherwise, the Court of Chancery would be bound. The respondents invite your Lordships to review this decision and challenge its correctness. So the second issue which arises, if clause 9 (a) amounts to a trust, is whether the existing test for its validity is right in law and, if not, what the test ought to be.
Before dealing with these two questions some general observations, or reflections, may be permissible. It is striking how narrow and in a sense artificial is the distinction, in cases such as the present, between trusts or as the particular type of trust is called, trust powers, and powers. It is only necessary to read the learned judgments in the Court of Appeal to see that what to one mind may appear as a power of distribution coupled with a trust to dispose of the undistributed surplus, by accumulation or otherwise, may to another appear as a trust for distribution coupled with a power to withhold a portion and accumulate or otherwise dispose of it. A layman and, I suspect, also a logician would find it hard to understand what difference there is.
It does not seem satisfactory that the entire validity of a disposition should depend on such delicate shading. And if one considers how in practice reasonable and competent trustees would act, and ought to act, in the two cases, surely a matter very relevant to the question of validity, the distinction appears even less significant. To say that there is no obligation to exercise a mere power and that no court will
intervene to compel it, whereas a trust is mandatory and its execution may be compelled, may be legally correct enough but the proposition does not contain an exhaustive comparison of the duties of persons who are trustees in the two cases. A trustee of an employees' benefit fund, whether given a power or a trust power, is still a trustee and he would surely consider in either case that he has a fiduciary duty: he is most likely to have been selected as a suitable person to administer it from his knowledge and experience, and would consider he has a responsibility to do so according to its purpose. It would be a complete misdescription of his position to say that, if what he has is a power unaccompanied by an imperative trust to distribute, he cannot be controlled by the court unless he exercised it capriciously, or outside the field permitted by the trust (cf. Farwell on Powers, 3rd ed., p. 524). Any trustee would surely make it his duty to know what is the permissible area of selection and then consider responsibly, in individual cases, whether a contemplated beneficiary was within the power and whether, in relation to other possible claimants, a particular grant was appropriate.
Correspondingly a trustee with a duty to distribute, particularly among a potentially very large class, would surely never require the preparation of a complete list of names, which anyhow would tell him little that he needs to know. He would examine the field, by class and category; might indeed make diligent and careful inquiries, depending on how much money he had to give away and the means at his disposal, as to the composition and needs of particular categories and of individuals within them; decide upon certain priorities or proportions, and then select individuals according to their needs or qualifications. If he acts in this manner, can it really be said that he is not carrying out the trust?
Differences there certainly are between trusts (trust powers) and powers, but as regards validity, should they be so great as that in one case complete, or practically complete, ascertainment is needed, but not in the other? Such distinction as there is would seem to lie in the extent of the survey which the trustee is required to carry out: if he has to distribute the whole of a fund's income, he must necessarily make a wider and more systematic survey than if his duty is expressed in terms of a power to make grants. But just as, in the case of a power, it is possible to underestimate the fiduciary obligation of the trustee to whom it is given, so, in the case of a trust (trust power), the danger lies in overstating what the trustee requires to know or to inquire into before he can properly execute his trust. The difference may be one of degree rather than of principle: in the well-known words of Sir George Farwell, Farwell on Powers, 3rd ed. (1916), p. 10, trusts and powers are often blended, and the mixture may vary in its ingredients.
…
The basis for the Broadway Cottages principle is stated to be that a trust cannot be valid unless, if need be, it can be executed by the court, and (though it is not quite clear from the judgment where argument ends and decision begins) that the court can only execute it by ordering an equal distribution in which every beneficiary shares. So it is necessary to examine the authority and reason for this supposed rule as to the execution of trusts by the court.
Assuming, as I am prepared to do for present purposes, that the test of validity is whether the trust can be executed by the court, it does not follow that execution is impossible unless there can be equal division.
As a matter of reason, to hold that a principle of equal division applies to trusts such as the present is certainly paradoxical. Equal division is surely the last thing the settlor ever intended: equal division among all may, probably would, produce a result beneficial to none. Why suppose that the court would lend itself to a whimsical execution? And as regards authority, I do not find that the nature of the trust, and of the court's powers over trusts, calls for any such rigid rule. Equal division may be sensible and has been decreed, in cases of family trusts, for a limited class, here there is life in the maxim "equality is equity," but the cases provide numerous examples where this has not been so, and a different type of execution has been ordered, appropriate to the circumstances.
…
The conclusion which I would reach, implicit in the previous discussion, is that the wide distinction between the validity test for powers and that for trust powers is unfortunate and wrong, that the rule recently fastened upon the courts by Inland Revenue Commissioners v. Broadway Cottages Trust ought to be discarded, and that the test for the validity of trust powers ought to be similar to that accepted by this House in In re Gulbenkian's Settlements [1970] A.C. 508 for powers, namely, that the trust is valid if it can be said with certainty that any given individual is or is not a member of the class.
I am interested, and encouraged, to find that the conclusion I had reached by the end of the argument is supported by distinguished American authority. Professor Scott in his well-known book on trusts (Scott on Trusts (1939)) discusses the suggested distinction as regards validity between trusts and powers and expresses the opinion that this would be "highly technical" (s. 122, p. 613). Later in the second Restatement of Trusts (1959), s. 122 (which Restatement aims at stating the better modern view and which annotates the Broadway Cottages case), a common test of invalidity is taken, whether trustees are "authorised" or "directed": this is that the class must not be so indefinite that it cannot be ascertained whether any person falls within it. The reporter is Professor Austin Scott. In his abridgment, published in 1960 (Scott's Abridgment of The Law of Trusts, s. 122, p. 239), Professor Scott maintains the same position:
"It would seem that if a power of appointment among the members of an indefinite class is valid, the mere fact that the testator intended not merely to confer a power but to impose a duty to make such an appointment should not preclude the making of such an appointment. It would seem to be the height of technicality that if a testator authorises a legatee to divide the property among such of the testator's friends as he might select, he can properly do so, but that if he directs him to make such a selection, he will not be permitted to do so."
Assimilation of the validity test does not involve the complete assimilation of trust powers with powers. As to powers, I agree with my noble and learned friend Lord Upjohn in In re Gulbenkian's Settlements that although the trustees may, and normally will, be under a fiduciary duty to consider whether or in what way they should exercise their power, the court will not normally compel its exercise. It will intervene if the trustees exceed their powers, and possibly if they are proved to have exercised it capriciously. But in the case of a trust power, if the trustees do not exercise it, the court will: I respectfully adopt as to this the statement in Lord Upjohn's opinion
(p. 525). I would venture to amplify this by saying that the court, if called upon to execute the trust power, will do so in the manner best calculated to give effect to the settlor's or testator's intentions. It may do so by appointing new trustees, or by authorising or directing representative persons of the classes of beneficiaries to prepare a scheme of distribution, or even, should the proper basis for distribution appear by itself directing the trustees so to distribute. The books give many instances where this has been done, and I see no reason in principle why they should not do so in the modern field of discretionary trusts (see Brunsden v. Woolredge (1765) 1 Amb. 507, Supple v. Lowson (1773) 2 Amb. 729, Liley v. Hey (1842) 1 Hare 580 and Lewin on Trusts, 16th ed. (1964), p. 630). Then, as to the trustees' duty of inquiry or ascertainment, in each case the trustees ought to make such a survey of the range of objects or possible beneficiaries as will enable them to carry out their fiduciary duty (cf. Liley v. Hey). A wider and more comprehensive range of inquiry is called for in the case of trust powers than in the case of powers.
Two final points: first, as to the question of certainty. I desire to emphasise the distinction clearly made and explained by Lord Upjohn ([1970] A.C. 508, 524) between linguistic or semantic uncertainty which, if unresolved by the court, renders the gift void, and the difficulty of ascertaining the existence or whereabouts of members of the class, a matter with which the court can appropriately deal on an application for directions. There may be a third case where the meaning of the words used is clear but the definition of beneficiaries is so hopelessly wide as not to form "anything like a class" so that the trust is administratively unworkable or in Lord Eldon's words one that cannot be executed (Morice v. Bishop of Durham, 10 Ves.Jr. 522, 527). I hesitate to give examples for they may prejudice future cases, but perhaps "all the residents of Greater London" will serve. I do not think that a discretionary trust for "relatives" even of a living person falls within this category.

speech of Lord Upjohn in Vandervell v IRC [1967] 2 AC 291

2009-05-05T04:56:00.001-07:00

Please read the following extract from the speech of Lord Upjohn in Vandervell v IRC [1967] 2 AC 291 and then answer the questions which follow. Note that this case is also vitally important in the area of resulting trusts. That aspect of the decision, however, has been omitted. You should also note that Lord Wilberforce decided the section 53(1)(c) point on a different ground altogether from the rest of his brethen. That reasoning is not pursued here.
(Brief facts: Mr Vandervell was the beneficiary of a bare trust of shares. He orally directed his trustee to transfer the shares to the Royal College of Surgeons, which it did, his intention being that they receive the shares outright. The question for the House of Lords was whether this oral direction was a purported disposition of Vandervell's interest under the trust and therefore void for want of writing, with the result that the Royal College of Surgeons only held the shares on bare trust for Vandervell, and not outright as he had intended. The Court of Appeal had found that section 53(1)(c) had no application to the facts of the case. The case then went to the House of Lords.)
Lord Upjohn
The question is whether notwithstanding the plainly expressed intention of the appellant by himself or his agents the absence of writing prevented any equitable or beneficial interest in the shares passing to the college so that contrary to his wishes and understanding they remained bare trustees for him. This depends entirely upon the true construction of section 53(1)(c) of the Law of Property Act, 1925, which the Crown maintain makes writing necessary to pass the beneficial interest. This section was generally thought to re-enact section 9 of the Statute of Frauds and that section had never been applied to a trust of an equitable interest of pure personalty. Before the cases of Grey v Inland Revenue Commissioners and Oughtred v Inland Revenue Commissioners, both in your Lordships' House, this argument would have been quite untenable.
It was shown in those cases that the Law of Property Act, 1925, was not re-enacting section 9 but that it had been amended by the Law of Property Act, 1924. The relevant words of section 53 are: '...a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same. ....' Those words were applied in Grey and Oughtred to cases where the legal estate remained outstanding in a trustee and the beneficial owner was dealing and dealing only with the equitable estate. That is understandable; the object of the section, as was the object of the old Statute of Frauds, is to prevent hidden oral transactions in equitable interests in fraud of those truly entitled, and making it difficult, if not impossible, for the trustees to ascertain who are in truth his beneficiaries. But when the beneficial owner owns the whole beneficial estate and is in a position to give directions to his bare trustee with regard to the legal as well as the equitable estate there can be no possible ground for invoking the section where the beneficial owner wants to deal with the legal estate as well as the equitable estate.
I cannot agree with Diplock LJ that prima facie a transfer of the legal estate carries with it the absolute beneficial interest in the property transferred; this plainly is not so, eg, the transfer may be on a change of trustee; it is a matter of intention in each case. But if the intention of the beneficial owner in directing the trustee to transfer the legal estate to X is that X should be the beneficial owner I can see no reason for any further document or further words in the document assigning the legal estate also expressly transferring the beneficial interest; the greater includes the less. X may be wise to secure some evidence that the beneficial owner intended him to take the beneficial interest in case his beneficial title is challenged at a later date but it certainly cannot, in my opinion, be a statutory requirement that to effect its passing there must be some writing under section 53(1)(c).
Counsel for the Crown admitted that where the legal and beneficial estate was vested in the legal
owner and he desired to transfer the whole legal and beneficial estate to another he did not have to do more than transfer the legal estate and he did not have to comply with section 53(1)(c); and I can see no relevant difference between that case and this.
As I have said, that section is, in my opinion, directed to cases where dealings with the equitable estate are divorced from the legal estate and I do not think any of their Lordships in Grey and Oughtred had in mind the case before your Lordships. To hold the contrary would make assignments unnecessarily complicated; if there had to be assignments in express terms of both legal and equitable interests that would make the section more productive of injustice than the supposed evils it was intended to prevent.
I think the Court of Appeal reached a correct conclusion on this point ....

Viscount Simonds and Lord Radcliffe in Grey v IRC [1960] AC 1

2009-05-05T04:50:00.000-07:00

Viscount Simonds and Lord Radcliffe in Grey v IRC [1960] AC 1
Please read the following extracts from the speeches of Viscount Simonds and Lord Radcliffe in Grey v IRC [1960] AC 1 and then answer the questions which follow.
(Brief facts: Mr Hunter was the sole beneficiary of a bare trust of shares. His trustees were also trustees of six other trusts in favour of Hunter's grandchildren. Hunter gave oral directions to his trustees to hold the shares on the trusts of the grandchildren's settlement. The question for the House of Lords was whether Hunter's oral direction to his trustees was a purported disposition of an equitable interest under a trust and therefore void because not in writing.)
Viscount Simonds
These facts give rise to the plain question whether the oral directions given by Mr Hunter ... were effective or were, having regard to section 53(1)(c) of the Law of Property Act, 1925, wholly ineffective. ... [W]ere the ... oral directions given by Mr Hunter dispositions by him of the equitable interest in the shares held by the appellants as nominees for him?
If the word 'disposition' is given its natural meaning, it cannot, I think, be denied that a direction given by Mr Hunter, whereby the beneficial interest in the shares theretofore vested in him became vested in another or others, is a disposition. But it is contended by the appellants that the word 'disposition' is to be given a narrower meaning and (so far as relates to inter vivos transactions) be read as if it were synonymous with 'grants and assignments' and that, given this meaning, it does not cover such a direction as was given in this case. As I am clearly of the opinion, which I understand to be shared by your Lordships, that there is no justification for giving the word 'disposition' a narrower meaning than it ordinarily bears, it will be unnecessary to discuss the interesting problem that would otherwise arise.
My Lords, the argument for narrowing the meaning of 'disposition' was that the Law of Property Act, 1925, was a consolidating Act, that among the Acts which it consolidated was the Statute of Frauds 1677, section 9, that that section enacted that 'all grants and assignments of any trust or confidence shall likewise be in writing, signed by the party granting or assigning the same, or by such last will or devise, or else shall likewise be utterly void and of none effect,' and that therefore the word 'disposition' in section 53(1)(c) of the Act of 1925 is to be given the same meaning as would be given to 'grants and assignments' in section 9 of the Statute of Frauds.
My Lords, the principles applicable to the construction of a consolidating Act are not in doubt. The presumption is that such an Act is not intended to alter the law, but this prima facie view must yield to plain words to the contrary .... If the Law of Property Act, 1925, was a typical consolidating Act, the question would be whether the alteration from 'grants and assignments' to 'disposition' changed the law by enlarging the area of void transactions - a question that might not be easy to answer. But the Act of 1925 cannot be thus regarded. It was, it is true, a consolidating Act, but it was, with a number of other Acts, the culmination of a body of legislation by which a large part of the law of real and personal estate was profoundly altered. ... [The Act of 1925 must therefore] be construed so as to give each word the meaning proper to it in its context. So construed the word 'disposition' in section 53(1)(c) has the natural meaning which I attributed to it at the opening of this opinion. ...
The appeal must, in my opinion, be dismissed with costs.
Lord Radcliffe
My Lords, if there is nothing more in this appeal than the short question whether the oral direction that Mr Hunter gave to his trustees ... amounted in any ordinary sense of the words to a 'disposition of an equitable interest or trust subsisting at the time of the disposition,' I do not feel
any doubt as to my answer. I think that it did. Whether we describe what happened in technical or in more general terms the full equitable interest in the 18,000 shares concerned, which at that time was his, was (subject to any statutory invalidity) diverted by his direction from his ownership into the beneficial ownership of the various equitable owners, present and future, entitled under his six existing settlements.
But that is not the question which has led to difference of opinion in the courts below. Where opinions have differed is on the point whether his direction was a 'disposition' within the meaning of section 53(1)(c) of the Law of Property Act, 1925, the argument for giving it a more restricted meaning in that context being that section 53 is to be construed as no more than a consolidation of three sections of the Statute of Frauds, sections 3, 7 and 9. So treated, 'disposition,' it is said, is merely the equivalent of the former words of section 9, 'grants and assignments,' except that testamentary disposition has to be covered as well, and a direction to a trustee by the equitable owner of the property prescribing new trusts upon which it is to be held is a declaration of trust but not a grant or assignment. The argument, concludes, therefore, that neither before January 1, 1926, nor since did such a direction require to be in writing signed by the disponor or his agent in order to be effective.
In my opinion, it is a very nice question whether a parol declaration of trust of this kind was or was not within the mischief of section 9 of the Statute of Frauds. The point has never, I believe, been decided and perhaps it never will be. Certainly it was long established as law that while a declaration of trust respecting land or any interest therein required writing to be effective, a declaration of trust respecting personalty did not. Moreover, there is warrant for saying that a direction to his trustee by the equitable owner of trust property prescribing new trusts of that property was a declaration of trust. But it does not necessarily follow from that that such a direction, if the effect of it was to determine completely or pro tanto the subsisting equitable interest of the maker of the direction, was not also a grant or assignment for the purposes of section 9 and therefore required writing for its validity. Something had to happen to that equitable interest in order to displace it in favour of the new interests created by the direction: and it would be at any rate logical to treat the direction as being an assignment of the subsisting interest to the new beneficiary or beneficiaries or, in other cases, a release or surrender of it to the trustee.
I do not think, however, that that question has to be answered for the purposes of this appeal. It can only be relevant if section 53(1)(c) of the Law of Property Act, 1925, is treated as a true consolidation of the three sections of the Statute of Frauds concerned and as governed, therefore, by the general principle, with which I am entirely in agreement, that a consolidating Act is not to be read as effecting changes in the existing law unless the words it employs are too clear in their effect to admit of any other construction. ... [I]n my opinion, it is impossible to regard section 53(1)(c) of the Law of Property Act, 1925, as a consolidating enactment in this sense. ...
The Law of Property Act, 1925, itself was, no doubt, strictly a consolidating statute. But what it consolidated was not merely the Law of Property Act, 1922, a statute which had itself effected massive changes in the law relating to real property and conveyancing, but also the later Law of Property (Amendment) Act, 1924. The Statute of Frauds sections had not been touched by the Act of 1922; but they were in effect repealed and re-enacted in altered form by the operation of section 3 of the Act of 1924 and the provisions of Schedule III to that Act. The Schedule is divided into two Parts, the contents of Part I being described simply as 'Amendments' and the contents of Part II being headed by the description 'Provisions facilitating consolidation. ...' I suppose that the authors of the Act of 1924 understood what was the significance of the division of Schedule III into these two Parts under their different headings. I cannot say that I do. Each Part, when examined, is seen to contain numerous amendments of various previous statutes relating to real property and conveyancing, apart from the Act of 1922 itself, and in this sort of matter I cannot see how one can satisfactorily measure the degrees of substance involved in the various changes. The point is that they were avowedly changes. It is paragraph 15 of Part II of Schedule III which deals with the Statute of Frauds; and though the introductory words do seem to suggest that the sections concerned are only being re-enacted in different words, it is apparent,
when they are read through, that this is not so and that alterations of more or less moment are in fact being made. This new wording is what is carried into section 53 of the Act of 1925.
For these reasons I think that there is no direct link between section 53(1)(c) of the Act of 1925 and section 9 of the Statute of Frauds. The link was broken by the changes introduced by the amending Act of 1924, and it was those changes, not the original statute, that section 53 must be taken as consolidating. If so, it is inadmissible to allow the construction of the word 'disposition' in the new Act to be limited or controlled by any meaning attributed to the words 'grant' or 'assignment' in section 9 of the old Act.

Trust Law - Computer Assessment 1

2009-05-05T04:46:00.000-07:00

Which of the following statements provides the most accurate summary of the effect of section 53(1)(c) of the Law of Property Act 1925?
Choose one answer. A. Assignments of a beneficiary's interest under a trust can only be evidenced by writing which is signed by the beneficiary or his/her agent
B. Dispositions of a beneficiary's interest under a trust can only be made in writing which is signed by the beneficiary
C. Dispositions of a beneficiary's interest under a trust can only be evidenced in writing which is signed by the beneficiary
D. Dispositions of a beneficiary's interest under a trust can only be made in writing which is signed by the beneficiary or his agent
E. Don't know
Feedback
That's correct.
This answer is correct, firstly, because the provision is not evidentiary but dispositive, secondly, because, unlike its predecessor, section 9 of the Statute of Frauds 1677, it is concerned with 'dispositions' and not only 'assignments', and thirdly, there is provision in the sub-section for signature by an agent.

Correct
Marks for this submission: 1/1.Question 2
Marks: 1 As a matter of logic, what does section 53(1)(c) pressuppose?
Choose one answer. A. That the object of any trust has an interest which he/she can transmit to others
B. That the object of some trusts has an interest which he/she can transmit to others
C. That the object of a trust can create a trust of his/her interest under the trust
D. That the object of a trust can contract to assign his/her interest to another
E. Don't know
Feedback
That's correct.
In that section 53(1)(c) LPA 1925 lays down formalities for the disposition of an object's interest under a trust, it pressupposes that the interest is transmissible. But it says nothing about the circumstances in which a transmissible interest will arise, and for that reason it is wrong to say that the object of any trust has an interest which he/she can transmit to others; as we saw in Chapter 4, the objects of a discretionary trust have no assignable interest. It is also wrong to say that the object of a trust can create a trust of his/her interest under the trust, because though it is true that the object, at least of a fixed trust, can create a trust of their interest under the trust, a sub-trust, this is not presupposed by section 53(1)(c). For exactly the same reason it is wrong to say that the object of a trust can contract to assign his/her interest to another.

Correct
Marks for this submission: 1/1.Question 3
Marks: 1 To what type of trusts does section 53(1)(c) apply?
Choose one answer. A. Only trusts of land
B. Only trusts of shares
C. All trusts
D. Possibly all trusts
E. Don't know
Feedback
That's correct.
The law in this area is uncertain. Section 53(1)(c)'s predecessor, section 9 of the Statute of Frauds 1677, probably only applied to trusts of land. And though on its face, section 53(1)(c) would appear not to be so restricted, especially when compared to sub-sections (a) and (b), both of which specifically restrict themselves to land, the provision has to be read in light of the definition section in the Law of Property Act 1925, section 205(1)(x) of which defines 'equitable interests' as equitable interests 'in or over land'. Section 205 is, however, prefaced by the statement that it applies 'unless the context otherwise requires', and some textbooks argue that to make sense of section 53 as a whole requires us to disapply section 205(1)(x) in this case: see, eg, Oakley, pp 98-99. Note that the point was not taken in any of the leading cases on section 53(1)(c), Grey, Oughtred, and Vandervell, and, despite what certain textbooks may tell you, the issue cannot therefore be said to be settled either way.

Correct
Marks for this submission: 1/1.Question 4
Marks: 1 Which of the following statements provides the most accurate summary of the effect of section 53(1)(b) of the Law of Property Act 1925?
Choose one answer. A. Allegations of a declaration of trust of land can only be proved by the production of written evidence signed by the party capable of declaring the trust
B. Declarations of trust must be in writing which is signed by the party capable of declaring the trust
C. Allegations of a declaration of trust can only be proved by written evidence signed by the party capable of declaring the trust or by his agent
D. Declarations of trusts of land must be in writing signed by the party capable of declaring the trust or by his agent
E. Don't know
Feedback
That's correct.
This answer is correct because, differently to section 53(1)(c), section 53(1)(b) is evidential, not dispositive, which means that the two answers that require the declaration to be 'in writing' are wrong. The other answer mentioning an agent for the party capable of declaring the trust is wrong both because it allows the possibility of an agent signing the relevant writing and because it is not confined to declarations of trust respecting land.

Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the following extracts from the speeches of Viscount Simonds and Lord Radcliffe in Grey v IRC [1960] AC 1, then answer the five questions (Q5 - Q9) that follow. Question 5
Marks: 1 What were the arguments of Mr Hunter?
Choose one answer. A. That section 53(1)(c) had no application because he was the beneficiary of a trust of shares, not land
B. That the word 'disposition' had to be given its natural meaning, which was 'grants or assignments'
C. That the Law of Property Act 1925 was a consolidating statute and the word 'disposition' had therefore to be given a meaning equivalent to 'grants and assignments' under the Statute of Frauds 1677, and that a direction such as his was not a 'grant or assignment' but the creation of a new trust
D. That his direction amounted to a declaration of a sub-trust, which was not caught by the statutory provision
E. Don't know
Feedback
That's correct.
The argument that section 53(1)(c) had no application because he was the beneficiary of a trust of shares, not land, though plausible, was not one put to their lordships by Mr Hunter. The argument that the word 'disposition' had to be given its natural meaning, which was 'grants or assignments', was not argued by Mr Hunter. The argument that his direction amounted to a declaration of a sub-trust, which was not caught by the statutory provision, does not fit the facts of the case; although Mr Hunter did argue that a new trust had been created, he did not say that it was a sub-trust.

Correct
Marks for this submission: 1/1.Question 6
Marks: 1 How did their lordships deal with the argument about consolidation?
Choose one answer. A. The Law of Property Act 1925 consolidated the relevant provisions of the Statute of Frauds 1677, with the result that it should be construed as not having changed the law. The word 'disposition' could not therefore be read as equivalent to 'grants and assignments'
B. The Law of Property Act 1925 was not a consolidating statute, with the result that there was no connection between section 9 of the Statute of Frauds 1677 and section 53(1)(c) of the 1925 Act
C. The Law of Property Act 1925 consolidated the relevant provisions of the Statute of Frauds 1677, with the result that it should be construed as not having changed the law. The word 'disposition' must therefore be read as equivalent to 'grants and assignments'
D. The Law of Property Act 1925 had not consolidated the relevant provisions of the Statute of Frauds 1677, with the result that the word 'disposition' had to be read as equivalent to a 'declaration of trust'
E. Don't know
Feedback
That's correct.
If the 1925 Act had indeed not changed the law, then the word 'disposition' should have been read as equivalent to 'grants and assignments', which invalidates one of the answers. Moreover, their lordships found that the 1925 Act was not a consolidating statute: consequently the two answers that assert that it was a consolidating statute are incorrect. Indeed, the answer that claims that such consolidation meant that the word 'disposition' must be read as equivalent to 'grants and assignments' was the losing argument of Mr Hunter. Although their lordships did indeed find that the 1925 Act was not a consolidating statute, they did not hold that the word 'disposition' had to be read as equivalent to a 'declaration of trust'. If you are in any doubt as to what is meant by a 'consolidating statute', you should revisit your work on Common Law Reasoning and Institutions, where it will have been explained.

Correct
Marks for this submission: 1/1.Question 7
Marks: 1 What did Lord Radcliffe say to the argument that an oral direction was not a 'grant or assignment'?
Choose one answer. A. Even if the Law of Property Act 1925 could be seen as a consolidating statute, there was an argument for saying that what Hunter did amounted to a 'grant or assignment' of his interest under the trust
B. Since the Law of Property Act 1925 was not a consolidating statute, the question whether Hunter's oral direction might have amounted to a 'grant or assignment' need not be addressed
C. Even if the Law of Property Act 1925 was to be seen as a consolidating statute, what Hunter did amounted to a 'grant or assignment' of his interest under the trust
D. What Hunter did amounted to the creation of a new trust, and as such did not amount to a transfer of his interest under that trust to those entitled under the six settlements
E. Don't know
Feedback
That's correct.
To say that "since the Law of Property Act 1925 was not a consolidating statute, the question whether Hunter's oral direction might have amounted to a 'grant or assignment' need not be addressed" is wrong because, unlike Viscount Simonds, Lord Radcliffe was at least prepared to address the issue. To say that "even if the Law of Property Act 1925 was to be seen as a consolidating statute, what Hunter did amounted to a 'grant or assignment' of his interest under the trust" is wrong, however, because although Lord Radcliffe did think that there was an argument that Hunter's contentions would have in any case failed even if the consolidation argument were accepted, he was not unequivocal on this point. Lastly, to say that "what Hunter did amounted to the creation of a new trust, and as such did not amount to a transfer of his interest under that trust to those entitled under the six settlements" is wrong because this is precisely the argument which Hunter raised and which Lord Radcliffe, albeit tentatively, rejected.

Correct
Marks for this submission: 1/1.Question 8
Marks: 1 How did their lordships define the word 'disposition'?
Choose one answer. A. The word 'disposition' was to be equated with 'grants and assignments'
B. The word 'disposition' meant any act by which the beneficiary was deprived of his interest under the trust
C. The word 'disposition' was to be equated with 'declaration'
D. The word 'disposition' was to be given its 'natural meaning'
E. Don't know
Feedback
That's correct.
To say it was to be equated with 'grants and assignments' is wrong because this was the argument of Mr Hunter rejected by their lordships. The answer that it meant any act by which the beneficiary was deprived of his interest under the trust was not the answer given by their lordships, and would in any case have been beyond the possible scope of the sub-section. To say it was to be equated with 'declaration' is wrong because it would render section 53(1)(b) of the Law of Property Act 1925 redundant. And though it is correct to say that 'disposition' was to be given its 'natural meaning', their lordships unfortunately did not venture to define the word 'dispostion' any further than this.

Correct
Marks for this submission: 1/1.Question 9
Marks: 1 In what way was Mr Hunter's oral direction a 'disposition' of his interest under the trust?
Choose one answer. A. Mr Hunter's oral direction was a 'disposition' because his beneficial ownership of the shares was now vested in his grandchildren
B. Mr Hunter's oral direction was a 'disposition' because the trust under which they had originally been held had come to an end
C. Mr Hunter's oral direction was a 'disposition' because he had assigned his interest in the shares to his grandchildren
D. Mr Hunter's oral direction was a 'disposition' because he no longer held the beneficial interest
E. Don't know
Feedback
That's correct.
The answer that "it was a 'disposition' because the trust under which they had originally been held had come to an end" is wrong because, although it was true that Mr Hunter's interest under the trust had come to an end, this was not the ground on which the House of Lords found that he had purported to make a disposition. And it could not in any case be the answer, because trusts can come to an end for reasons outside the control of the beneficiary, and section 53(1)(c) clearly comprehends some act on the part of such a person. The answer that it "was a 'disposition' because he had assigned his interest in the shares to his grandchildren" is wrong because both Viscount Simonds and Lord Radcliffe, though more tentatively, proceed on the assumption that Hunter's oral direction was not an assignment of anything. Lastly, the answer that it "was a 'disposition' because he no longer held the beneficial interest" is wrong because, although it is correct to say that Hunter no longer held the beneficial interest, both Viscount Simonds and Lord Radcliffe placed emphasis on the fact that the beneficial interest was now in the grandchildren.

Correct
Marks for this submission: 1/1.Please read the following extract from the speech of Lord Upjohn in Vandervell v IRC [1967] 2 AC 291 and then answer the three questions (Q10 - Q12) that follow. Question 10
Marks: 1 What does Lord Upjohn mean when he says that the Inland Revenue's arguments with regard to section 53(1)(c) would have been 'untenable' before the cases of Grey and Oughtred?
Choose one answer. A. It was previously thought that section 53(1)(c) only applied to trusts other than trusts of land
B. It was previously thought that section 53(1)(c) only applied to trusts of land
C. It was previously thought that section 53(1)(c) only applied to trusts of shares
D. It was previously thought that section 53(1)(c) only applied to testamentary dispositions
E. Don't know
Feedback
That's correct.

Answer (b) is correct because, as we saw, it seems to have been accepted on all sides in Grey (and also in Oughtred) that section 53(1)(c), differently to section 9 of the Statute of Frauds 1677, was not confined to land. What Lord Upjohn does not say, however, and this point is vital, is that the question was not raised in either of those two cases. It is therefore still open to a litigant to argue that section 53(1)(c) is confined to land, though subject, of course, to the argument mentioned in the feedback to question 3 (above). Answer (a) is wrong because it gets the history the wrong way around, answer (c) is wrong because it inverts the assumption in both Grey and Oughtred, and answer (d) is wrong because section 53(1)(c), though it includes them, is clearly not confined to testamentary dispositions.

Correct
Marks for this submission: 1/1.Question 11
Marks: 1 How does Lord Upjohn distinguish the decision of the House of Lords in Grey?
Choose one answer. A. That was a case where the trustee had vested in him both the legal and equitable estate
B. That was a case where the trustee was dealing with the equitable estate
C. That was a case where the dealings by the beneficiary did not amount to a disposition of his equitable interest
D. That was a case where the legal estate remained outstanding in a trustee and the beneficiary was dealing only with the equitable estate
E. Don't know
Feedback
That's correct.

In the present case, Vandervell had instructed his trustee to convey the shares to the Royal College of Surgeons. In that sense, the facts were different to Grey, for there the shares themselves were not to move from one person to another, but merely to be held for a different person than before. Answer (a) is clearly wrong, because if it was true that the trustee had vested in him both the legal and equitable estates, there would have been no trust at all. Answer (b) is also incorrect, because the trustee is not able to deal with an interest he does not have. And answer (c) is incorrect because it is the exact opposite of what was decided in Grey.

Correct
Marks for this submission: 1/1.Question 12
Marks: 1 What, for Lord Upjohn, was the purpose of section 53(1)(c)?
Choose one answer. A. To enable the Inland Revenue to collect tax
B. To keep manufacturers of paper in business
C. To enable companies to know to whom they should be paying dividends
D. To prevent hidden oral transactions in equitable interests in fraud of those truly entitled, and making it difficult, if not impossible, for the trustees to ascertain who were their beneficiaries
E. Don't know
Feedback
That's correct.

Answer (a) is wrong, although it is an answer commonly given by examinees. It is simply a coincidence that tax is sometimes leviable on written instruments, on the one hand, and that section 53(1)(c) requires a written instrument for certain types of transaction, on the other. Answer (b) is simply facetious; and answer (c) cannot be right because the provision is not limited to shares and in any case the dividends will be payable to the trustee, who has the chose in action consisting of the shares, not the beneficiary.

Correct
Marks for this submission: 1/1.Application
Please read the following examination question and then answer the two questions which follow:

Consider the following factual scenario:
Ben, the beneficiary of a bare trust of a title to a painting, orally directs Tom, his trustee, to give the title to Amelia, it being Ben's intention that Amelia receive it as a gift. Tom hands her the painting. Ben later dies intestate, and Fred, his next of kin, asserts that Amelia holds the title to the painting for him on a bare trust and demands that she convey it to him under the rule in Saunders v Vautier.
Question 13
Marks: 1 What argument will Fred make in relation to section 53(1)(c) of the Law of Property Act 1925 in support of his claim?
Choose one answer. A. That Ben's failure to comply with the sub-section means that the trustee did not manage to convey to Amelia Ben's interest under the trust
B. That Ben's failure to comply with the sub-section means that nothing passed from the trustee to Amelia
C. That Ben's failure to comply with the sub-section means that Ben's interest under the trust was still in him on his death
D. That Ben's failure to comply with the sub-section means that Ben's interest in the trust was destroyed on the transfer of title to Amelia
E. Don't know
Feedback
That's correct.

The only argument which has the remotest possibility of working for Fred is argument (c). Argument (a) is a non-starter, because the trustee did not have Ben's interest to transfer. Argument (b) is also a non-starter, for section 53(1)(c) only governs the beneficiary's dealings with his own interest, not the dealings of others with theirs. And argument (d), if true, would contradict Fred's claim altogether.

Correct
Marks for this submission: 1/1.Question 14
Marks: 1 Vandervell is obviously against Fred. How might he argue that it could be distinguished?
Choose one answer. A. That Vandervell concerned a gift to charity, while the present case involves a gift to a private individual
B. That Vandervell was a case concerning tax, while the present case concerns intestate succession
C. That Vandervell was a case concerning realty, while the present case concerns personalty
D. That Vandervell was a case concerning shares, while the present case concerns a painting
E. Don't know
Feedback
That's correct.

Of the four arguments presented, only argument (d) is a possible argument that Fred could present in order to distinguish Vandervell. The reason it is relevant is that some argue that it is part of the ratio of Lord Upjohn's speech that the transfer of the shares from the trustees to the Royal College of Surgeons had to be done in writing. This, said Lord Upjohn, made any further writing redundant. This case, however, is different, for title to the painting passed by delivery, a physical handing over of possession of the painting, without the need for any writing. If it was indeed fundamental to Lord Upjohn's reasoning that the writing required to transfer the shares was enough for the purposes of section 53(1)(c), then Fred could argue that this case is different. As to the other arguments, (a) is wrong because nothing turned on the fact that Vandervell's intention was to make a gift to charity; (b) is wrong because, again, nothing turned on this point; and (c) is wrong because it was not land which was the subject-matter of the transfer in Vandervell. Of course, there is, as we have seen, an argument that section 53(1)(c) is confined to land, but that is not the argument presented here. Note also that there are other arguments that Fred could make, most particularly in relation to the correctness of Vandervell itself. As further reading, you might want to now, with some knowledge of these difficult cases under your belt, look at Brian Green's article on the topic in (1984) 47 MLR 385.

Correct
Marks for this submission: 1/1.

Tort Law Assessment III

2009-04-29T09:37:00.000-07:00

No additional materials are provided for the following ten 'knowledge' questions. Please read each question carefully and select an answer from those available.
Question 1
Marks: 1 Which of the following is the correct definition of assault:-
Choose one answer. A. A person intentionally causes another to fear for his or her own safety
B. A person intentionally causes another to fear immediate and unlawful force
C. A person intentionally causes another to apprehend the application of immediate and unlawful force
D. A person intentionally causes another to reasonably apprehend the application of immediate and unlawful force on his person
E. Don't know
Feedback
The correct answer is (c).

Apprehension, not fear, is required - therefore the answers mentioning fear are incorrect. Furthermore, the apprehension of immediate and unlawful force must be reasonable: see Thomas v NUM (South Wales Area) [1986] Ch 20.

Incorrect
Marks for this submission: 0/1.Question 2
Marks: 1 Can silence ever amount to an assault?
Choose one answer. A. No
B. Yes, if the victim apprehends the possibility of imminent force
C. Yes, provided that the other party intends to upset the victim
D. Yes, if the victim is intentionally caused to apprehend the possibility of imminent force due to silent telephone calls
E. Don't know
Feedback
The correct answer is (d).

The House of Lords in R v Ireland and Burstow [1998] A.C. 147 made it clear that mere words (and, in certain circumstances, silence) could amount to an assault, but much would depend on the circumstances. Lord Steyn commented that 'The proposition that a gesture may amount to an assault, but that words can never suffice, is unrealistic and indefensible. A thing said is also a thing done. There is no reason why something said should be incapable of causing an apprehension of immediate personal violence, e.g. a man accosting a woman in a dark alley saying, "Come with me or I will stab you." I would, therefore, reject the proposition that an assault can never be committed by words. That brings me to the critical question whether a silent caller may be guilty of an assault. The answer to this question seems to be to be "Yes, depending on the facts."... Take now the case of the silent caller. He intends by his silence to cause fear and he is so understood. The victim is assailed by uncertainty about his intentions ... As a matter of law the caller may be guilty of an assault: whether he is or not will depend on the circumstance and in particular on the impact of the caller's potentially menacing call and calls on the victim' (at page 162). The liability is not confined to silent telephone calls and depends on the effect of the conduct on the victim (rather than on the other party's intention).

Incorrect
Marks for this submission: 0/1.Question 3
Marks: 1 Which of the following statements is not a battery?
Choose one answer. A. Giving a work colleague a kiss
B. Throwing water at a work colleague
C. Bumping into a work colleague in the corridor
D. Hitting a work colleague very hard on the back to congratulate him or her
E. Don't know
Feedback
The correct answer is (d).
A battery is the intentional and direct application of force to another person. Giving a work colleague a kiss is a battery unless, of course, there is consent. Bumping into a work colleague in the corridor may technically amount to a direct application of force to another person, but such ordinary contact will not be actionable: see Wilson v Pringle [1986] 2 All E.R. 440. Whilst bumping into a colleague may be seen as part of ordinary life, hitting her or him very hard on the back, even in congratulations, or throwing water would be seen as exceeding what is ordinarily acceptable in such circumstances.

Correct
Marks for this submission: 1/1.Question 4
Marks: 1 The tort of false imprisonment requires which of the following?
Choose one answer. A. Imprisonment
B. That the defendant falsely justifies his or her interference with the victim's freedom of movement
C. That the victim is confined by someone who is not a police officer
D. That there is a complete restriction on the victim's freedom of movement
E. Don't know
Feedback
That's correct.
The tort of false imprisonment does not require actual imprisonment, but that the defendant imposes a complete restriction on the victim's freedom of movement: see Bird v Jones (1845) 7 QB 742. It is not a requirement that the defendant is not a police officer, although a police officer will not be liable under this tort if his or her actions are expressly or impliedly authorised by law. The defendant's actions must be intentional, but need not involve any false statement of fact.

Correct
Marks for this submission: 1/1.Question 5
Marks: 1 Which of the economic torts typically involves the defendant threatening to act in an unlawful manner towards a third party with the intention to damage the economic interests of the claimant?
Choose one answer. A. Deceit
B. Intimidation
C. Intentionally inducing breach of contract
D. Conspiracy
E. Don't know
Feedback
That's correct.
The tort of intimidation typically involves an illegal action or threat by the defendant to a third party which aims to harm the economic interests of the claimant: see Rookes v Barnard [1964] A.C. 1129. It is distinct from intentionally inducing breach of contract which does not require that the defendant commits a wrongful act to persuade the third party not to enter into a contract with the claimant: see Lumley v Gye (1853) E & B 216. Conspiracy clearly involves more than one party and deceit requires a specific false statement of fact which is intended to (and which does) influence the claimant's conduct.

Correct
Marks for this submission: 1/1.Question 6
Marks: 1 What is the difference between pure purpose and unlawful means conspiracy?
Choose one answer. A. Only the former requires that the predominant purpose is to harm the claimant's interests
B. A pure purpose conspiracy will also amount to a criminal offence
C. It is a trick question - there is in reality no difference
D. Unlawful means conspiracy requires more than five conspirators
E. Don't know
Feedback
That's correct.
The two torts are distinct, although they are both forms of conspiracy requiring two or more persons to conspire: it is therefore incorrect to say either that there is no difference. The tort of conspiracy also has no relationship nowadays with criminal law despite their common origins and so it is incorrect to say that a pure purpose conspiracy will also amount to a criminal offence, although there may of course be a possibility that the conspirator's conduct amounts to a criminal offence. Only pure purpose conspiracy requires that the predominant purpose of the conspirators is to injure the claimant: see Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] A.C. 435. This is not the case for unlawful means conspiracy: see Lonrho v Fayed [1992] 1 A.C. 448.

Correct
Marks for this submission: 1/1.Question 7
Marks: 1 Defamation is a tort which protects:-
Choose one answer. A. The claimant's reputation
B. The claimant's privacy
C. The claimant's freedom of expression
D. The claimant's feelings
E. Don't know
Feedback
That's correct.
Defamation protects the claimant's reputation, not his or her feelings or privacy. On this basis, the tort will only occur when a third party discovers the allegation i.e. the words have been published.

Correct
Marks for this submission: 1/1.Question 8
Marks: 1 In which case did a judge make the following statement: 'not only is the matter defamatory if it brings the plaintiff into hatred, ridicule, or contempt by reason of some moral discredit on [the plaintiff's] part, but also if it tends to make the plaintiff be shunned and avoided'?
Choose one answer. A. It was Millett L.J. in Berkoff v Burchill
B. It was Greene L.J. in Byrne v Deane
C. It was Slesser L.J. in Youssoupoff v MGM Pictures Ltd.
D. It was Lord Atkin in Sim v Stretch
E. Don't know
Feedback
That's correct.
In Youssoupoff, Slesser L.J. expanded the definition of defamatory to include words which cause a person to be shunned or avoided (at page 587). He continues: 'It is for that reason that persons who have been alleged to have been insane, or be suffering from certain diseases, and other cases where no direct moral responsibility could be placed upon them, have been held to be entitled to bring an action to protect their reputation and their honour.'

Correct
Marks for this submission: 1/1.Question 9
Marks: 1 The falsity of the defamatory statement:-

Choose one answer. A. Must be proved by the defendant
B. Must be proved by the claimant
C. Is presumed, unless the defendant proves otherwise
D. Is presumed
E. Don't know
Feedback
That's correct.
Defamatory statements are presumed to be untrue, unless the defendant proves otherwise. This can be achieved by establishing the defence of justification or truth. This gives the claimant a considerable advantage, but has not been found to be contrary to Article 10 of the European Convention on Human Rights.

Correct
Marks for this submission: 1/1.Question 10
Marks: 1 Which of the following is not a defence to the tort of defamation:-
Choose one answer. A. Qualified privilege
B. Mistake
C. Consent
D. Innocent dissemination
E. Don't know
Feedback
That's correct.
It is no excuse that the defendant is mistaken if his or her statements are defamatory, refer to the claimant and have been published. The mistake may, however, enable the defendant to rely on sections 2-4 of the Defamation Act 1996 (procedure for unintentional defamation).

Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.
Please read the speech of Lord Bingham in the case of Jameel v Wall Street Journal Europe SPRL (No 2) [2006] UKHL 44, [2006] 4 All E.R. 1279, then answer the six questions (Q11 - Q16) that follow. Note that this is a very recent case and so not covered in your Subject Guide, but deals with an application of the principles described at 12.3.3.

Context
The claimants (a prominent Saudi Arabian businessman and the trading company of which he was president and general manager which was incorporated in Saudi Arabia) began proceedings for defamation against the defendant. The defendant had published a newspaper article which had been edited and printed in Belgium and distributed in Europe, the United States and the Middle East which asserted that, at the request of United States enforcement agencies, the central bank of Saudi Arabia was monitoring certain bank accounts to prevent their use for channelling funds to terrorist organizations which included that of the claimants' trading group. Although the company neither owned property nor traded in the United Kingdom, it had a commercial reputation here. The defendant sought to rely on a defence of qualified privilege.
Question 11
Marks: 1 Why was the company able to sue for libel when it had not shown that it had suffered financial loss?
Choose one answer. A. Because it had a commercial reputation in the United Kingdom
B. Because it traded mainly in the United Kingdom
C. Because it was incorporated in the United Kingdom
D. Because the company owned property in the United Kingdom
E. Don't know
Feedback
That's correct.
Libel is actionable per se, that is, without proof of damage. Although the company did not trade, nor own property in the United Kingdom and was incorporated in Saudi Arabia, provided it can show that it possesses a commercial reputation in the United Kingdom, it may bring an action for libel. The courts draw no distinction between individuals and companies.

Correct
Marks for this submission: 1/1.Question 12
Marks: 1 The rule that companies can sue for defamation is, according to Lord Bingham, consistent with Article 10 of the European Convention on Human Rights because:-
Choose one answer. A. It has not been challenged in the European Court of Human Rights
B. English law should be permitted to establish its own rules of defamation
C. Article 10 gives only a qualified right to freedom of expression, which allows necessary and proportionate restrictions
D. The argument that defamation can have a chilling effect on freedom of expression is wrong
E. Don't know
Feedback
That's correct.
In paragraph 20, his Lordship makes it clear that the question of recovery of damages for defamation by a trading corporation which has not proved financial loss has been subject to challenge before the European Commission and Court and that the court did not hold the current rule to be necessarily inconsistent with Article 10. The Human Rights Act 1998 gave domestic effect to the European Convention on Human Rights and includes reference to Article 10: it is therefore incorrect to say that English law should be permitted to establish its own rules of defamation. His Lordship also notes that the chilling effect argument has been exaggerated in this context, but does not indicate that it has no force: it is therefore incorrect to say that the chilling effect argument is wrong. Paragraph 19 shows that the answer that Article 10 gives only a qualified right to freedom of expression is correct.

Correct
Marks for this submission: 1/1.Question 13
Marks: 1 Does Lord Bingham express any reservations about the ability of trading corporations to obtain damages for libel without proof of damage:-
Choose one answer. A. No. The tort of defamation exists to afford redress for all unjustified injuries to the reputation
B. Yes, if the damages awarded are excessive
C. Yes, where defamation of the company involves defamation of directors and individuals who are able to sue in their own right
D. No. The law is currently Convention-compliant
E. Don't know
Feedback
That's correct.
His lordship does express a reservation - see paragraphs 19 and 27 - and thus both "No" answers are incorrect. He expressly rejects the argument regarding a situation where directors and individuals are able to sue in their own right: see paragraph 21.

Correct
Marks for this submission: 1/1.Question 14
Marks: 1 To establish the defence of qualified privilege, it is necessary that:-
Choose one answer. A. The article published is in the public interest
B. The article published is of topical interest
C. The article published concerns a matter of political interest
D. The article published engages the interest of the public
E. Don't know
Feedback
That's correct.
Lord Bingham in paragraph 31 states that 'The necessary precondition of reliance on qualified privilege in this context is that the matter published should be one of public interest. In the present case the subject matter of the article complained of was of undoubted public interest. But that is not always, perhaps not usually, so. It has been repeatedly and rightly said that what engages the interest of the public may not be material which engages the public interest.' His Lordship thus distinguished the 'public interest' from something that engages the interest of the public. Public interest is also distinct from matters of topical and political interest, which may be in the public interest, but not necessarily so.

Correct
Marks for this submission: 1/1.Question 15
Marks: 1 In applying Lord Nicholls' ten criteria in Reynolds (2001), a court must:-
Choose one answer. A. Ensure that all 10 criteria are met
B. Examine whether the article could have been published without the inclusion of the particular ingredient complained of
C. Establish whether the thrust of the article is true
D. Use the criteria as pointers to indicate on the facts of each case whether the publication is protected by qualified privilege
E. Don't know
Feedback
That's correct.
Lord Bingham states that Lord Nicholl's criteria are guidance, not an absolute test. It is therefore incorrect to say that all ten must be met. Although the issue of whether the ingredient giving rise to the complaint was necessary for publication and the issue of the truth of the thrust of the article might be relevant to the court's decision, they will not always be significant: see paragraph 34. The use of the criteria as pointers as to whether or not the publication is protected by qualified privilege therefore represents his Lordship's view of the preferred approach to the Reynolds criteria.

Correct
Marks for this submission: 1/1.Question 16
Marks: 1 In Jameel, did his Lordship find the defence of qualified privilege to exist?
Choose one answer. A. Yes. On balance, the test of responsible journalism had been satisfied
B. No. The claimants should have been given a right of reply
C. Yes, because it is no longer necessary to attempt to give a right of reply or comment on the article
D. No. The article was not in the public interest
E. Don't know
Feedback
That's correct.
Despite his Lordship's doubts, Lord Bingham does find the publication to be protected by qualified privilege and so the two "No" answers are incorrect. The answer that "it is no longer necessary to attempt to give a right of reply or comment on the article" goes too far - his Lordship in paragraph 34 considers the impact of the newspaper's failure to obtain a comment, but finds, on balance, that it did not lead to a failure of responsible journalism.

Correct
Marks for this submission: 1/1.Application
Please answer the following four examination questions (Q17 - Q20):
Question 17
Marks: 1 David tells Goliath: 'if I was not studying for my Tort Multiple Choice Test, I would strike you dead.' He is, in fact, diligently studying for his Tort Multiple Choice Test. Which of the following is correct?
Choose one answer. A. David commits an assault
B. David commits a battery
C. David intentionally causes Goliath nervous shock
D. David doesn't commit assault or battery, nor does he intentionally cause nervous shock
E. Don't know
Feedback
That's correct.
Here, the words negate what would otherwise be an assault - Turberville v Savage (1669) 1 Mod Rep 3 - and so David does not commit an assault. Equally, there is no direct application of force amounting to a battery, nor any evidence of intentionally inflicted nervous shock. It must therefore be the case that David does not commit any of these torts.

Correct
Marks for this submission: 1/1.Question 18
Marks: 1 Keith tells Lenny that Lenny's fiancée has had an accident on the eve of their wedding. Lenny collapses with shock. Keith laughs and tells him that it was a joke. Which of the following actions could Lenny bring against Keith?
Choose one answer. A. Assault
B. Battery
C. Intentionally causing nervous shock
D. Defamation
E. Don't know
Feedback
That's correct.
Assault requires the reasonable apprehension of immediate and unlawful force on the person - there is no evidence that Lenny had any such apprehension. Battery requires the intentional and direct application of force to another person - again this has not occurred. The statement does not harm Lenny's reputation as required by defamation. The facts indeed resemble those of Wilkinson v Downton [1867] 2 Q.B. 57, whose principle is stated in the answer "Intentionally causing nervous shock".

Correct
Marks for this submission: 1/1.Question 19
Marks: 1 James, a journalist, writes the following story which is published in the local newspaper, the Daily Rag:
'We are sympathetic towards Dr Morris - after all, it must be upsetting to find out that no-one leaves her surgery alive!'
Several patients have recently died at Dr Morris' clinic due to natural causes. There is no evidence that Dr Morris is anything but an excellent physician. Which of the following is a jury likely to find?
Choose one answer. A. The statement is not defamatory as it is sympathetic towards Dr Morris' plight
B. The statement is defamatory, but James has a good defence of justification
C. The statement is defamatory due to an innuendo that Dr Morris is incompetent. This is not true
D. The statement is defamatory, but James, as a journalist, can rely on the defence of qualified privilege
E. Don't know
Feedback
That's correct.
The statement contains an innuendo that Dr Morris is incompetent. There is no evidence that it is true and no basis given to sustain a defence of qualified privilege under the Reynolds test of responsible journalism.

Correct
Marks for this submission: 1/1.Question 20
Marks: 1 Fred takes Barney to one side and tells him that he is a liar and a cheat. Barney's business partner, Betty, happens to be leaning out of a window above them and hears every word. As a result, she decides to terminate the partnership and Barney loses his investment in the business. Is Fred?
Choose one answer. A. Not liable in slander because he had no intention to publish the words
B. Not liable in slander because Barney suffers no damage
C. Not liable in slander because Betty should not be listening to private conversations
D. Not liable in slander because it was unforeseeable that Betty would overhear the words
E. Don't know
Feedback
That's correct.
Slander requires special damage in addition to the usual requirements for defamation, except in four exceptional cases. The words have been published if a third party hears them and intention is irrelevant. As a result it is incorrect to assert that Fred is not liable because he had no intention to publish the words. Barney suffers financial loss as a result of the statement and so it is incorrect to say he suffers no damage (arguably, it would be actionable per se in any event due to the damage to Barney's professional reputation under section 2, Defamation Act 1952). However, it must be reasonably foreseeable that someone would overhear (see Theaker v Richardson [1962] 1 W.L.R. 151). It is only by chance that Betty overhears what was meant to be a private conversation and so the answer is that Fred could not have foreseen this and is therefore not liable in slander. The courts will not, however, make moral judgements as to people listening to other people's conversations - the test is an objective one of reasonable foresight and therefore it is incorrect to use the subjective opinion that Betty should not have been listening.

Correct
Marks for this submission: 1/1.

HOUSE OF LORDS OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE Jameel and others (Respondents) v. Wall Street Journal Europe Sprl (Appellant

2009-04-29T09:35:00.000-07:00

large circulation in the United States.
3. The respondents, claimants in the proceedings, are Saudi Arabian. The first respondent is a prominent businessman and president of the Abdul Latif Jameel Group, an international trading conglomerate based in the Kingdom of Saudi Arabia comprising numerous companies and with interests in cars, shipping, property and distribution of electronic goods. The second respondent is a company incorporated in Saudi Arabia and is part of the Group. The first respondent is the general manager and president of the company, which does not itself own property or conduct any trade or business here, but which has a commercial reputation in England and Wales.
4. On 6 February 2002 the newspaper published the article which gave rise to these proceedings. It was headed "Saudi Officials Monitor Certain Bank Accounts" with a smaller sub-heading "Focus Is on Those With Potential Terrorist Ties". It bore the by-line of James M Dorsey, an Arabic-speaking reporter with specialist knowledge of Saudi Arabia, and acknowledged the contribution of Glenn Simpson, a staff writer in Washington. The gist of the article, succinctly stated in the first paragraph, was that the Saudi Arabian Monetary Authority, the Kingdom's central bank, was, at the request of US law enforcement agencies, monitoring bank accounts associated with some of the country's most prominent businessmen in a bid to prevent them from being used, wittingly or unwittingly, for the funnelling of funds to terrorist organisations. This information was attributed to "U.S. officials and Saudis familiar with the issue". In the second paragraph a number of companies and individuals were
named, among them "the Abdullatif Jamil Group of companies" who, it was stated later in the article, "couldn't be reached for comment".
5. The jury in due course found that the article referred to was defamatory of both respondents. They may have understood the article to mean that there were reasonable grounds to suspect the involvement of the respondents, or alternatively that there were reasonable grounds to investigate the involvement of the respondents, in the witting or unwitting funnelling of funds to terrorist organisations. For present purposes it is immaterial which defamatory meaning the jury gave the passage complained of, neither of which the newspaper sought to justify.
6. The article was published some five months after the catastrophic events which took place in New York and Washington on 11 September 2001. During the intervening months the US authorities had taken determined steps, with strong international support, to cut off the flow of funds to terrorist organisations, including Al-Qaida. These steps were of particular importance in relation to Saudi Arabia, since a large majority of the suspected hijackers were of Saudi origin, and it was believed that much of their financial support came from Saudi sources. Yet the position of the Saudi authorities was one of some sensitivity. The Kingdom was an ally of the United States and condemned terrorism. But among its devoutly Muslim population there were those who resented the Kingdom's association with the United States and espoused the cause of Islamic jihad. Thus there were questions about whether, and to what extent, the Kingdom was co-operating with the US authorities in cutting off funds to terrorist organisations. This was, without doubt, a matter of high international importance, a very appropriate matter for report by a serious newspaper. But it was a difficult matter to investigate and report since information was not freely available in the Kingdom and the Saudi authorities, even if co-operating closely with those of the United States, might be embarrassed if that fact were to become generally known.
7. The trial of the action before Eady J and a jury lasted some three working weeks and culminated in verdicts for the respondents and awards of £30,000 and £10,000 respectively. Much evidence was called on both sides, of which the House has been referred to short excerpts only. The judge rejected the newspaper's argument on the damage issue ([2003] EWHC 2945 (QB), [2004] 2 All ER 92) and the Court of Appeal agreed with him ([2005] EWCA Civ 74, [2005] QB 904). The judge also rejected the newspaper's claim to Reynolds privilege ([2004] EWHC 37 (QB)). On this question also the Court of Appeal upheld his decision, but on a more limited ground. This calls for more detailed consideration.
8. The judge put a series of questions to the jury which, so far as relevant to Reynolds privilege, were directed to two matters: the sources on which Mr Dorsey, as reporter, relied; and his attempt to obtain the respondents' response to his inclusion of their names in his proposed article. Mr Dorsey testified that he had relied on information given by a prominent Saudi businessman (source A), confirmed by a banker (source B), a US diplomat (source C), a US embassy official (source D) and a senior Saudi official (source E). In answer to the judge's questions the jury found that the newspaper had proved that Mr Dorsey had received the information he claimed to have received from source A, but had not proved that Mr Dorsey had received the confirmation he claimed from sources B-E inclusive. The judge attached significance to these negative findings, since Mr Dorsey said in evidence that he would not have
written the article in reliance on source A alone. In the Court of Appeal, the judge's reliance on these negative findings was criticised by the newspaper. At the outset of his direction to the jury the judge had pointed out that there was no plea of justification and that therefore, if the jury found the article defamatory of the respondents, they should assume it to be untrue. This direction, it was said, may well have infected the jury's approach to the questions concerning sources B-E. The Court of Appeal refused the newspaper leave to raise a new ground of misdirection, and thought (para 66) that the jury had "almost certainly" based their answers on the impression made by witnesses in court. But the Court of Appeal preferred to base its decision on the other ground relied on by the judge to deny privilege.
9. Mr Dorsey described attempts to obtain a response from the Group about his proposed article. He said he had telephoned the Group office at about 9.0 a.m. and left a recorded message. The jury found that the newspaper had not proved on the balance of probabilities that that was so. There was, it was agreed, a telephone conversation between Mr Dorsey and Mr Munajjed, an employee of the Group, on the evening of 5 February, the day before publication. During that conversation, according to Mr Munajjed, he had asked Mr Dorsey to wait until the following day for a comment by the Group. He had, he said, no authority to make a statement and the first respondent was in Japan, where the time was 3.0 a.m. Mr Dorsey denied that Mr Munajjed had asked him to wait. But the jury found that Mr Munajjed had made that request. It was on this ground, as I understand, that the Court of Appeal upheld the judge's denial of Reynolds privilege:
"82. We turn to the judge's observation that the Jameels were not given sufficient time to comment on the proposed publication. It was to this matter that the jury's questions 6 and 7 were addressed. Mr Dorsey had given evidence that he had telephoned the Jameels' offices on the morning before the publication and left a recorded message. The jury found that this did not take place. What the jury did find had taken place was that Mr Dorsey had spoken to the Jameels' representative, Mr Munajjed, on the evening before publication, that the latter had asked for the publication to be postponed so that he could contact Mr Jameel, who was in Japan on business, and that Mr Dorsey had declined this request. The judge found that there was no compelling reason why Mr Jameel could not have been afforded 24 hours to comment on the article. We can see no basis for challenging this conclusion, nor did Mr Robertson suggest that there was one."
10. I turn to the two issues raised in the appeal.
I DAMAGE
11. The issue under this head is whether a trading company which itself conducts no business but which has a trading reputation within England and Wales should be entitled to recover general damages for libel without pleading and proving that the publication complained of has caused it special damage. To resolve this question it is helpful to distinguish three sub-issues:
(1) whether such an entitlement exists under the current law of England and Wales;
(2) whether, if so, article 10 of the European Convention on Human Rights requires revision of the current domestic law; and
(3) whether, if not, the current domestic law should in any event be revised.
(1) The current domestic law
12. The tort of libel has long been recognised as actionable per se. Thus where a personal plaintiff proves publication of a false statement damaging to his reputation without lawful justification, he need not plead or prove special damage in order to succeed. Proof of injury to his reputation is enough.
13. It was argued in South Hetton Coal Company Limited v North-Eastern News Association Limited [1894] 1 QB 133 that this rule did not apply to trading companies. The newspaper in that case had published an article strongly critical of the way in which the plaintiff, a colliery owner, housed its workers, and the company had not pleaded or proved any actual damage. It was argued for the publisher that a corporation could have no personal character, and that the article had not related to the business of the company (pp 134, 137). The Court of Appeal unanimously rejected this argument. Lord Esher MR held the law of libel to be one and the same for all plaintiffs (p 138). While he referred to obvious differences between individuals and companies (pp 138-139), his conclusion (p 139) was clear:
"Then, if the case be one of libel - whether on a person, a firm, or a company - the law is that damages are at large. It is not necessary to prove any particular damage; the jury may give such damages as they think fit, having regard to the conduct of the parties respectively, and all the circumstances of the case."
There need be no evidence of particular damage (p 140). Lopes LJ agreed (p 141): a company may maintain an action for a libel reflecting on the management of its business without alleging or proving special damage. Kay LJ also agreed (p 148): a trading corporation may sue for a libel calculated to injure them in respect of their business, and may do so without any proof of damage general or special, although, where there is no such evidence, the damages given will probably be small.
14. In Lewis v Daily Telegraph Ltd [1964] AC 234, 262, Lord Reid pointed out that a company cannot be injured in its feelings but only in its pocket. There was, however, no challenge in that case to the principle laid down in South Hetton, which was not cited in either party's printed case, or in argument, or in any judgment.
15. Mr Robertson QC, for the newspaper, pointed out, quite correctly, that the Faulks Committee on Defamation, in its Report (Cmnd 5909, March 1975), para 336, recommended amendment of the South Hetton rule. The amendment recommended was, however, only to limit libel actions by trading corporations to cases where the trading corporation could establish either that it had suffered special damage or that the defamation was likely to cause it financial damage. This recommendation was made after considering trenchant criticisms of the existing rule made by Mr J A Weir ("Local Authority v Critical Ratepayer - a Suit in Defamation" (1972A) CLJ 238). It is not a recommendation to which Parliament has chosen to give effect.
16. In Derbyshire County Council v Times Newspapers Ltd the issue concerned the entitlement of a local authority, not a trading corporation, to sue in libel. But at first instance South Hetton was cited, and contributed to Morland J's conclusion that a local authority could sue: [1992] QB 770, 781, 783-788. On appeal, counsel for the newspaper distinguished South Hetton on the ground of the colliery company's trading character and counsel for the local authority relied on it: ibid, pp 792, 797. No member of the Court of Appeal questioned the decision. Balcombe LJ accepted South Hetton as binding for what it decided, but also (despite Mr Weir's criticism) expressed his agreement with it: p 809. In the House, counsel for the local authority cited the decision ([1993] AC 534, 536-537). Counsel for the newspaper did not criticise it, but distinguished it as applicable to a company with a business reputation which a local authority did not have (p 538). In his leading opinion, with which the other members of the House agreed, Lord Keith of Kinkel (who had been a member of the Faulks committee) cited South Hetton at some length, and also National Union of General and Municipal Workers v Gillian [1946] KB 81, in which a non-trading corporation (a trade union) had been assimilated to a trading corporation. He then continued (p 547):
"The authorities cited above clearly establish that a trading corporation is entitled to sue in respect of defamatory matters which can be seen as having a tendency to damage it in the way of its business. Examples are those that go to credit such as might deter banks from lending to it, or to the conditions experienced by its employees, which might impede the recruitment of the best qualified workers, or make people reluctant to deal with it. The South Hetton Coal Co case [1894] 1 QB 133 would appear to be an instance of the latter kind, and not, as suggested by Browne J, an authority for the view that a trading corporation can sue for something that does not affect it adversely in the way of its business. The trade union cases are understandable upon the view that defamatory matter may adversely affect the union's ability to keep its members or attract new ones or to maintain a convincing attitude towards employers. Likewise in the case of a charitable organisation the effect may be to discourage subscribers or otherwise impair its ability to carry on its charitable objects. Similar considerations can no doubt be advanced in connection with the position of a local authority. Defamatory statements might make it more difficult to borrow or to attract suitable staff and thus affect adversely the efficient carrying out of its functions."
Lord Keith then went on to give his reasons for concluding that a local authority was to be distinguished from other types of corporation, whether trading or non-trading.
17. In Derbyshire the correctness of South Hetton was not challenged, but acceptance of its correctness was an important step in Lord Keith's reasoning and I find no ambiguity in the proposition he propounded: the authorities clearly establish that a trading corporation is entitled to sue in respect of defamatory matters which can be seen as having a tendency to damage it in the way of its business. In Shevill v Presse Alliance SA [1996] AC 959, decided some three years later by a differently constituted committee of the House, one of the plaintiffs was a trading corporation and the presumption of damage in libel cases was treated as part of our national substantive law. I conclude that under the current law of England and Wales a trading company with a trading reputation in this country may recover general damages
without pleading or proving special damage if the publication complained of has a tendency to damage it in the way of its business.
(2) Article 10
18. Article 10 of the European Convention provides:
"1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. This Article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises.
2. The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary."
The central importance of this article in the Convention regime is clear beyond question, and is reflected in section 12 of the Human Rights Act 1998. Freedom to publish free of unjustifiable restraint must indeed be recognised as a distinguishing feature of the sort of society which the Convention seeks to promote. The newspaper in this case relies on article 10 to contend that a domestic rule entitling a trading corporation to sue in libel when it can prove no financial loss is an unreasonable restraint on the right to publish protected by article 10.
19. This is not an unattractive argument, and it would be persuasive if, in such a case, excessive, punitive or exemplary damages were awarded. But the damages awarded to the second claimant in this case were not excessive, and the argument encounters three problems of principle. First, as the text of article 10 itself makes plain, the right guaranteed by the article is not unqualified. The right may be circumscribed by restrictions prescribed by law and necessary and proportionate if directed to certain ends, one of which is the protection of the reputation or rights of others. Thus a national libel law may, consistently with article 10, restrain the publication of defamatory material.
20. Secondly, the national rule here in question, pertaining to the recovery of damages by a trading corporation which proves no financial loss, has been the subject of challenge before the European Commission and Court in the context of libel proceedings brought by two corporate plaintiffs against two individual defendants. In S and M v United Kingdom (1993) 18 EHRR CD 172, 173, the challenge to the rule was somewhat oblique and the Commission made the points summarised in para 19 above. In Steel and Morris v United Kingdom (2005) 41 EHRR 403 the challenge was direct: see para 31 (a) and (b), p 419. The Court accepted that the domestic rule was as stated in Derbyshire (para 40) but held (para 94) that
"The state therefore enjoys a margin of appreciation as to the means it provides under domestic law to enable a company to challenge the truth, and limit the damage, of allegations which risk harming its reputation."
The Court cited and echoed observations in an earlier decision, Märkt Intern and Beerman v Germany (1989) 12 EHRR 161, paras 33-38. Thus the Court did not hold the current rule to be necessarily inconsistent with article 10: it was a matter for the judgment of the national authorities.
21. Thirdly, the weight placed by the newspaper on the chilling effect of the existing rule is in my opinion exaggerated. Among the arguments it advances is that the rule is unnecessary since, it is said, defamation of a company involves defamation of directors and individuals who are free to sue as personal plaintiffs. I very much doubt if this is always so, although in some cases it will be. But, to the extent that it is so, I question whether the possibility of a claim by the company will add significantly to the chilling effect of a claim by the individuals.
22. I would accordingly answer this question in the negative.
(3) Revision of the current law
23. Since the European Court accords a generous margin of appreciation to the judgment of national authorities, and these include courts, it is appropriate for the House to review the merits of the South Hetton rule as re-stated in Derbyshire. The newspaper argues that, in accordance with the trend towards enhanced recognition of freedom of expression, the rule should be abrogated. Parliament could of course have legislated to abrogate or modify the rule, but it has not done so. It is accordingly necessary to revert to basic principles.
24. The tort of defamation exists to afford redress for unjustified injury to reputation. By a successful action the injured reputation is vindicated. The ordinary means of vindication is by the verdict of a judge or jury and an award of damages. Most plaintiffs are individuals, who are not required to prove that they have suffered financial loss or even that any particular person has thought the worse of them as a result of the publication complained of. I do not understand this rule to be criticised. Thus the question arises whether a corporation with a commercial reputation within the jurisdiction should be subject to a different rule.
25. There are of course many defamatory things which can be said about individuals (for example, about their sexual proclivities) which could not be said about corporations. But it is not at all hard to think of statements seriously injurious to the general commercial reputation of trading and charitable corporations: that an arms company has routinely bribed officials of foreign governments to secure contracts; that an oil company has wilfully and unnecessarily damaged the environment; that an international humanitarian agency has wrongfully succumbed to government pressure; that a retailer has knowingly exploited child labour; and so on. The leading figures in such corporations may be understood to be personally implicated, but not, in my opinion, necessarily so. Should the corporation be entitled to sue in its own right only if it can prove financial loss? I do not think so, for two main reasons.
26. First, the good name of a company, as that of an individual, is a thing of value. A damaging libel may lower its standing in the eyes of the public and even its own staff, make people less ready to deal with it, less willing or less proud to work for it. If this were not so, corporations would not go to the lengths they do to protect and burnish their corporate images. I find nothing repugnant in the notion that this is a value which the law should protect. Nor do I think it an adequate answer that the corporation can itself seek to answer the defamatory statement by press release or public statement, since protestations of innocence by the impugned party necessarily carry less weight with the public than the prompt issue of proceedings which culminate in a favourable verdict by judge or jury. Secondly, I do not accept that a publication, if truly damaging to a corporation's commercial reputation, will result in provable financial loss, since the more prompt and public a company's issue of proceedings, and the more diligent its pursuit of a claim, the less the chance that financial loss will actually accrue.
27. I do not on balance consider that the existing rule should be changed, provided always that where a trading corporation has suffered no actual financial loss any damages awarded should be kept strictly within modest bounds.
II REYNOLDS PRIVILEGE
28. The decision of the House in Reynolds v Times Newspapers Ltd [2001] 2 AC 127 built on the traditional foundations of qualified privilege but carried the law forward in a way which gave much greater weight than the earlier law had done to the value of informed public debate of significant public issues. Both these aspects are, I think, important in understanding the decision.
29. Underlying the development of qualified privilege was the requirement of a reciprocal duty and interest between the publisher and the recipient of the statement in question: see, for example, Harrison v Bush (1855) 5 E & B 344, 348; Pullman v Hill & Co Ltd [1891] 1 QB 524, 528; Adam v Ward [1917] AC 309, 334; Watt v Longsdon [1930] 1 KB 130, 147, all cases cited in Duncan & Neill on Defamation, 2nd ed (1983), pp 93-94, paras 14.04-14.05. Some of these cases concerned very limited publication, but Adam v Ward did not, and nor did Cox v Feeny (1863) 4 F & F 13; Allbutt v General Council of Medical Education and Registration (1889) 23 QBD 400; Perera v Peiris [1949] AC 1 and Webb v Times Publishing Co Ltd [1960] 2 QB 535. Thus where a publication related to a matter of public interest, it was accepted that the reciprocal duty and interest could be found even where publication was by a newspaper to a section of the public or the public at large. In Reynolds the Court of Appeal restated these tests ([2001] 2 AC 127, 167, 177), although it suggested a third supplemental test which the House held to be mistaken.
30. I do not understand the House to have rejected the duty/interest approach: see Lord Nicholls of Birkenhead, pp 194-195, 197, 204; Lord Steyn, p 213; Lord Cooke of Thorndon, pp 217, 224, 227; Lord Hope of Craighead, pp 229, 235; Lord Hobhouse of Woodborough, pp 237, 239. But Lord Nicholls (p 197) considered that matters relating to the nature and source of the information were matters to be taken into account in determining whether the duty-interest test was satisfied or, as he preferred to say "in a simpler and more direct way, whether the public was entitled to know the particular information."
31. The necessary pre-condition of reliance on qualified privilege in this context is that the matter published should be one of public interest. In the present case the subject matter of the article complained of was of undoubted public interest. But that is not always, perhaps not usually, so. It has been repeatedly and rightly said that what engages the interest of the public may not be material which engages the public interest.
32. Qualified privilege as a live issue only arises where a statement is defamatory and untrue. It was in this context, and assuming the matter to be one of public interest, that Lord Nicholls proposed (at p 202) a test of responsible journalism, a test repeated in Bonnick v Morris [2003] 1 AC 300, 309. The rationale of this test is, as I understand, that there is no duty to publish and the public have no interest to read material which the publisher has not taken reasonable steps to verify. As Lord Hobhouse observed with characteristic pungency (p 238), "No public interest is served by publishing or communicating misinformation". But the publisher is protected if he has taken such steps as a responsible journalist would take to try and ensure that what is published is accurate and fit for publication.
33. Lord Nicholls (at p 205) listed certain matters which might be taken into account in deciding whether the test of responsible journalism was satisfied. He intended these as pointers which might be more or less indicative, depending on the circumstances of a particular case, and not, I feel sure, as a series of hurdles to be negotiated by a publisher before he could successfully rely on qualified privilege. Lord Nicholls recognised (at pp 202-203), inevitably as I think, that it had to be a body other than the publisher, namely the court, which decided whether a publication was protected by qualified privilege. But this does not mean that the editorial decisions and judgments made at the time, without the knowledge of falsity which is a benefit of hindsight, are irrelevant. Weight should ordinarily be given to the professional judgment of an editor or journalist in the absence of some indication that it was made in a casual, cavalier, slipshod or careless manner.
34. Some misunderstanding may perhaps have been engendered by Lord Nicholls' references (at pp 195, 197) to "the particular information". It is of course true that the defence of qualified privilege must be considered with reference to the particular publication complained of as defamatory, and where a whole article or story is complained of no difficulty arises. But difficulty can arise where the complaint relates to one particular ingredient of a composite story, since it is then open to a plaintiff to contend, as in the present case, that the article could have been published without inclusion of the particular ingredient complained of. This may, in some instances, be a valid point. But consideration should be given to the thrust of the article which the publisher has published. If the thrust of the article is true, and the public interest condition is satisfied, the inclusion of an inaccurate fact may not have the same appearance of irresponsibility as it might if the whole thrust of the article is untrue.
35. These principles must be applied to the present case. As recorded in para 8 above, the Court of Appeal upheld the judge's denial of Reynolds privilege on a single ground, discounting the jury's negative findings concerning Mr Dorsey's sources: that the newspaper had failed to delay publication of the respondents' names without waiting long enough for the respondents to comment. This seems to me, with respect, to be a very narrow ground on which to deny the privilege, and the ruling subverts the
liberalising intention of the Reynolds decision. The subject matter was of great public interest, in the strictest sense. The article was written by an experienced specialist reporter and approved by senior staff on the newspaper and The Wall Street Journal who themselves sought to verify its contents. The article was unsensational in tone and (apparently) factual in content. The respondents' response was sought, although at a late stage, and the newspaper's inability to obtain a comment recorded. It is very unlikely that a comment, if obtained, would have been revealing, since even if the respondents' accounts were being monitored it was unlikely that they would know. It might be thought that this was the sort of neutral, investigative journalism which Reynolds privilege exists to protect. I would accordingly allow the appeal and set aside the Court of Appeal judgment.
36. I am in much more doubt than my noble and learned friends what the consequence of that decision should be. The House has not, like the judge and the jury, heard the witnesses and seen the case develop day after day. It has read no more than a small sample of the evidence. It seems to me a large step for the House, thus disadvantaged, to hold that the publication was privileged, and I am not sure that counsel for the newspaper sought such a ruling. But I find myself in a minority, and it serves no useful purpose to do more than express my doubt.

Tort Law Assessment II

2009-04-29T09:26:00.000-07:00

Question: In the case of Wheat v E Lacon & Co Ltd [1966] A.C. 552 , the House of Lords defined the occupier of premises under the Occupiers' Liability Act 1957 as someone who:-
Choose one answer. A. Lives on the premises
B. Owns the premises
C. Has sufficient control of the premises
D. Occupies the premises
E. Don't know
Feedback
The correct answer is (c)

The word "occupier" is not defined in either the Occupiers' Liability Act 1957 nor the Occupiers' Liability Act 1984. The House of Lords in Wheat v Lacon, therefore, relied on the common law definition which requires control of the premises. As Lord Denning explains at page 577 : ' In the Occupiers' Liability Act, 1957, the word "occupier" is used in the same sense as it was used in the common law cases on occupiers' liability for dangerous premises. It was simply a convenient word to denote a person who had a sufficient degree of control over premises to put him under a duty of care towards those who came lawfully on to the premises.'

Correct
Marks for this submission: 1/1.Question 2
Marks: 1 Is the following a sufficient warning to protect a visitor to your premises?
Choose one answer. A. 'Watch out!'
B. 'Care should always be taken on the premises'
C. 'Enter at your peril'
D. 'Please use alternative door as this door is faulty'
E. Don't know
Feedback
The correct answer is (d)

Warnings are expressly mentioned in both the Occupiers' Liability Act 1957 (s2(4)(a)) and the Occupiers' Liability Act 1984 (s1(5)) as means by which an occupier can discharge his or her duty of care to the visitor or non-visitor. Under the 1957 Act, the common duty of care will only be discharged if the warning is sufficiently detailed to enable the visitor to be reasonably safe. In Roles v Nathan [1963] 1 W.L.R. 1117, Lord Denning gives an example of a footbridge over a stream which was rotten and dangerous. The occupier would be liable if he only put up a notice stating "This bridge is dangerous," where the visitor had no option but to go over the bridge. Only if there were two footbridges, one of which was rotten, and the other safe a hundred yards away, could the occupier escape liability by putting up a notice: "Do not use this footbridge. It is dangerous. There is a safe one further upstream." Such a warning is sufficient because it does enable the visitor to be reasonably safe. In the question, therefore, the incorrect answers lack sufficient detail. The visitor is not given sufficient information to enable him or her to avoid the danger. 'Please use alternative door as this door is faulty' explains the problem and gives an alternative means of entry - this would be sufficient to enable the visitor to be reasonably safe.

Correct
Marks for this submission: 1/1.Question 3
Marks: 1 Which of the following statements is correct?
Choose one answer. A. A duty is owed to trespassers if the occupier is aware of the danger (or has reasonable grounds to believe that it exists), knows (or has reasonable grounds to believe that) the trespasser is (or may come) into the vicinity of the danger, and the risk is one against which, in all the circumstances of the case, he may reasonably be expected to offer the other some protection
B. The duty owed to trespassers is to avoid any wilful act undertaken with the deliberate intention of harming him or her
C. The duty owed to trespassers is one of common humanity
D. No duty of care is owed to trespassers
E. Don't know
Feedback
The correct answer is (a)

If these conditions are satisfied, section 1(4) specifies that 'Where, by virtue of this section, an occupier of premises owes a duty to another in respect of such a risk, the duty is to take such care as is reasonable in all the circumstances of the case to see that he does not suffer injury on the premises by reason of the danger concerned'.

"The duty owed to trespassers is to avoid any wilful act undertaken with the deliberate intention of harming him or her" and "The duty owed to trespassers is one of common humanity" represent the earlier common law tests which existed prior to the Act (Addie v Dumbreck [1929] A.C. 358 and BRB v Herrington [1972] A.C. 877 respectively). "No duty of care is owed to trespassers" is obviously incorrect.

Correct
Marks for this submission: 1/1.Question 4
Marks: 1 Which of the following statements is correct?
Choose one answer. A. An employer has no direct duty towards its employees in tort. Liability only exists under the law of contract
B. An employer may be both primarily and vicariously liable for injury to its employees
C. An employer may only be liable in tort towards its employees under the tort of breach of statutory duty
D. The doctrine of vicarious liability means that the employer can be liable vicariously for injury to its employees by other employees. This, together with protection under the tort of breach of statutory duty, determines when an employer will be liable towards its employees
E. Don't know
Feedback
The correct answer is (b)

There are three possible ways in which an employer may be liable towards its employees: primarily in negligence (see Wilsons and Clyde Coal Co Ltd v English [1938] A.C. 57) or for breach of statutory duty (e.g. Groves v Lord Wimborne [1898] 2 Q.B. 402), and vicariously under the doctrine of vicarious liability which renders it liable for torts committed by employees in the course of their employment.

Correct
Marks for this submission: 1/1.Question 5
Marks: 1 Section 4(1)(e) of the Consumer Protection Act 1987 states that 'In any civil proceedings by virtue of this Part against any person ("the person proceeded against") in respect of a defect in a product it shall be a defence for him to show that the state of scientific and technical knowledge at the relevant time was not such that a producer of products of the same description as the product in question might be expected to have discovered the defect if it had existed in his products while they were under his control'.

This means that:

Choose one answer. A. The producer has a good defence if he is unable to discover the defect in the product
B. The producer has a good defence if a reasonable producer, possessing the scientific and technical knowledge accessible at the time the product was put into circulation, could not have detected the defect
C. The producer has a good defence if, having taken reasonable steps to investigate scientific and technical developments, he could not have detected the defect
D. The producer has a good defence if, although aware of the risk of a defect, he could not due to the state of scientific and technical knowledge at the relevant time detect the defect in the product
E. Don't know
Feedback
That's correct.

"The producer has a good defence if he is unable to discover the defect in the product" is subjective and thus incorrect. "The producer has a good defence if, although aware of the risk of a defect, he could not due to the state of scientific and technical knowledge at the relevant time detect the defect in the product" represents the position in A v National Blood Authority [2001] 3 All E.R. 289, which Burton J found not to satisfy section 4(1)(e). "The producer has a good defence if, having taken reasonable steps to investigate scientific and technical developments, he could not have detected the defect" is closer but, according to EC v United Kingdom [1997] All ER (EC) 481, is not strict enough - the producer is expected to be aware of ALL accessible knowledge which may require more than reasonable steps to acquire this knowledge.

Correct
Marks for this submission: 1/1.Question 6
Marks: 1 The primary aim of the tort of private nuisance is to:
Choose one answer. A. Prevent neighbourhood disputes
B. Protect the environment from pollution
C. Protect the occupiers' use and enjoyment of land
D. Protect the use and enjoyment of land of those with rights to land
E. Don't know
Feedback
That's correct.

Although preventing neighbourhood disputes and protecting the environment from pollution might be the result of the tort of private nuisance, its primary aim is to protect the use and enjoyment of those with rights to land: see Hunter v Canary Wharf Ltd [1997] A.C. 655. "Protect the occupiers' use and enjoyment of land" is too broad as occupiers might include persons without rights to land.

Correct
Marks for this submission: 1/1.Question 7
Marks: 1 Which of the following determine 'reasonable user' in all cases of private nuisance?
Choose one answer. A. The duration and frequency of the interference
B. The nature of the locality
C. Both the duration and frequency of the interference and the nature of the locality
D. The utility of the defendant's conduct
E. Don't know
Feedback
The correct answer is "The duration and frequency of the interference".

St Helen's Smelting Co v Tipping (1865-66) L.R. 1 Ch. App. 66 indicates that where physical damage to the property has been caused, the court will pay little attention to the nature of the locality. "The nature of the locality" cannot therefore be said to determine 'reasonable user' in ALL cases of private nuisance, rendering two of the answers above incorrect. Utility is relevant, but tends to influence the courts in exercising its equitable jurisdiction whether to grant an injunction (see Miller v Jackson [1977] Q.B. 966) and cannot therefore be said to satisfy the question.

Incorrect
Marks for this submission: 0/1.Question 8
Marks: 1 Which of the following is not a defence to the tort of private nuisance:-
Choose one answer. A. Statutory authority
B. Twenty years' prescription
C. Coming to the nuisance
D. Consent
E. Don't know
Feedback
That's correct.

Coming to the nuisance is not a defence: Bliss v Hall (1838) 4 Bing N.C. 183. "Statutory authority", "twenty years' prescription" and "consent" are all good defences to the tort of private nuisance.

Correct
Marks for this submission: 1/1.Question 9
Marks: 1 Which of the following statements is correct?
Choose one answer. A. A private individual can always bring an action for public nuisance
B. A private individual can only bring an action for public nuisance when a crime has been committed
C. A private individual can only bring an action for public nuisance with the support of the Attorney General
D. A private individual can only bring an action for public nuisance when he can show special damage
E. Don't know
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That's correct.

A private individual must show special damage i.e. damage in excess of that suffered by the public at large. If he or she cannot prove this, then the only other option is to persuade the Attorney General to bring a relator action or the local authority to bring an action under section 222 of the Local Government Act 1972.

Correct
Marks for this submission: 1/1.Question 10
Marks: 1 Under the doctrine of vicarious liability, an employer will not be liable for the torts of its employees committed in the course of his or her employment if:-

Choose one answer. A. The employee has been prohibited from acting in that way
B. The employee's act is not connected with his employment
C. The employee has harmed another employee under the doctrine of common employment
D. The employer is not insured
E. Don't know
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That's correct.

The courts will not consider the provision of insurance in their judgments.

A mere prohibition of the act in question will not necessarily take it outside the course of employment: see Rose v Plenty [1976] 1 W.L.R. 141 where the employee had been expressly instructed not to employ minors to assist on his milk round, but did so and injured his thirteen-year-old assistant. The employer was vicariously liable for his actions.

Although the doctrine of common employment did prevent vicarious liability for the tortious infliction of injury by one employee on another, this was abolished in 1948 by the Law Reform (Personal Injuries) Act 1948, section 1.

"The employee's act is not connected with his employment" therefore most accurately reflects the current legal position: see Lister v Hesley Hall Ltd [2002] 1 A.C. 215.

Correct
Marks for this submission: 1/1.Comprehension
Each question in the Comprehension section refers to an extract. Please make sure you read the relevant extract before answering the questions below.

Please read the speech of Lord Bingham in the case of Transco Plc v Stockport MBC [2003] UKHL 61 [2004] 2 A.C. 1, then answer the six questions (Q11 - Q16) that follow.

Context
The case examined the scope of the rule in Rylands v Fletcher. In 1966 the claimant was granted a right to install a gas main along a stretch of disused railway line which included an embankment at Brinnington in Stockport. On a nearby site owned by the defendant local authority lay a tower block of flats which was supplied with water by means of a water pipe which the authority had constructed between the tower block and the water main. In 1972 part of the disused line, including the embankment, was purchased by the authority, with the claimant continuing to have an easement of support in respect of its gas main. In 1992, without any negligence on the part of the authority, the water pipe leading to the block of flats fractured. As a result large quantities of water escaped underground and caused the collapse of the embankment, leaving the gas main exposed and unsupported. The claimant, having been compelled to carry out emergency repair work to its gas main, brought an action to recover the cost of the remedial work on the ground, inter alia, that the authority was strictly liable for non-natural user of land under the rule in Rylands v Fletcher.
Question 11
Marks: 1 In setting out the rule in Rylands v Fletcher, Blackburn J believed that:-
Choose one answer. A. He was creating a new legal principle
B. He was responding to recent flooding disasters
C. He was developing a rule to deal with the escape of water
D. He was not laying down any new principle of law
E. Don't know
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That's correct.

In paragraph 3, Lord Bingham explains the historical background to the judgment of Blackburn J in Rylands v Fletcher and that the judge did not conceive himself to be laying down any new principle of law, but regarded the case as one of an isolated interference with the claimant's use and enjoyment of land.

Correct
Marks for this submission: 1/1.Question 12
Marks: 1 According to Lord Bingham, what is the relationship between the rule in Rylands v Fletcher and the tort of private nuisance?
Choose one answer. A. The rule in Rylands v Fletcher is a sub-set of nuisance
B. The rule in Rylands v Fletcher has been absorbed into the tort of private nuisance
C. None. The rule in Rylands v Fletcher has been absorbed into the tort of negligence
D. The rule in Rylands v Fletcher is a separate tort to that of private nuisance
E. Don't know
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That's correct.

Lord Bingham, in paragraph 9, states that the rule in Rylands v Fletcher is a sub-set of nuisance. This means that the rule can be considered a 'type' of nuisance, but not that they are necessarily exactly the same: it is therefore incorrect to say either that the rule has been subsumed into the tort of private nuisance, or that it is a separate tort from it. His Lordship refused to follow the High Court of Australia which in Burnie Port Authority v General Jones Pty Ltd (1994) 120 A.L.R. 42 treated the rule as governed by the principles of ordinary negligence: the rule therefore cannot have been subsumed into the tort of negligence. Transco does not exclude future claims under the rule in Rylands v Fletcher, although it indicates that few claims will in reality succeed.

Correct
Marks for this submission: 1/1.Question 13
Marks: 1 Which of the following is a consequence of the rule in Rylands v Fletcher being a sub-species of the tort of private nuisance:-
Choose one answer. A. Claimants can no longer recover damages for death or personal injury
B. Claimants do not now have to demonstrate an escape from one set of premises to another
C. Claimants need not now show a non-natural use of land
D. It is no longer necessary to demonstrate that the loss suffered was reasonably foreseeable
E. Don't know
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That's correct.
Lord Bingham states at paragraph 9 that claims for death or personal injury will no longer be permitted under the rule in Rylands v Fletcher, despite decisions to the contrary in the past: see Shiffmann v Order of the Hospital of St John of Jerusalem [1936] 1 All E.R. 557. The other requirements of the tort, however, remain.

Correct
Marks for this submission: 1/1.Question 14
Marks: 1 The mischief or danger test is satisfied if something is brought onto the land which:-
Choose one answer. A. Is likely to cause harm if it escapes
B. Is likely to cause serious harm if it escapes
C. Is likely to give rise to an exceptionally high risk of harm if it escapes
D. Is likely to cause a catastrophe if it escapes
E. Don't know
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That's correct.
In requiring an 'exceptionally high risk of danger or mischief' in paragraph 10, Lord Bingham is restricting the scope of the rule beyond the likelihood of harm or serious harm being caused, although not to the extent of being likely to cause a catastrophe.

Correct
Marks for this submission: 1/1.Question 15
Marks: 1 'Non-natural user' is described by Lord Bingham as:-
Choose one answer. A. Use of anything not growing naturally on the land
B. A use which is not for the general benefit of the community
C. An extraordinary and unusual use of the land
D. Unreasonable use of the land
E. Don't know
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That's correct.
Lord Bingham in paragraph 11 helpfully reviews the alternative explanations of the 'non-natural user' requirement and prefers this description.

Correct
Marks for this submission: 1/1.Question 16
Marks: 1 The piping of water to the block of flats was a natural use of land because:-
Choose one answer. A. Water occurs naturally on land
B. The piping of water to premises is a normal and routine use of the land
C. The piping of water to premises is necessary for the use of land
D. The quantity of water was far less than that contained in a reservoir
E. Don't know
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That's correct.
Lord Bingham in paragraph 13 emphasises that although water in quantity can almost always cause some damage if it escapes, the rule in Rylands v Fletcher does not cover the routine piping of a water supply from the mains to the storage tanks in a block of flats. It cannot be characterised as 'extraordinary or unusual'. Only the argument that "the piping of water to premises is a normal and routine use of the land" satisfies the test set by his Lordship in Transco.

Correct
Marks for this submission: 1/1.Application
Please answer the following four examination questions (Q17 - Q20):
Question 17
Marks: 1 Alexander decides to go for a walk in the park run by Borcestershire Council on a hot summer's day. Feeling warm, he decides to dive into a natural lake in the centre of the park despite clear signs saying "Dangerous - do not swim - you could drown." He dives into the lake and hits his head on a rock at the bottom of the lake. He suffers serious injuries. In assessing whether Borcestershire Council is liable as an occupier, should a court consider its liability:
Choose one answer. A. In negligence
B. Under the Occupiers' Liability Act 1957
C. Under the Occupiers' Liability Act 1984
D. In relation to the defence of consent
E. Don't know
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That's correct.
The case resembles that of Tomlinson v Congleton BC [2004] 1 A.C. 46, where John Tomlinson chose to dive into a lake formed from a disused quarry in a park, despite notices stating 'Dangerous water: No swimming'. The majority of the House of Lords treated him as a trespasser - therefore placing his claim under the Occupiers' Liability Act 1984. Lord Hoffmann found that in diving into the water, Mr Tomlinson crossed the line between the status of lawful visitor and that of trespasser. Lord Scott, however, disputed this. Mr Tomlinson was prohibited from swimming. At no point did he swim - his accident occurred as a result of his disastrous dive! He therefore remained a visitor. This rather technical approach was not adopted by his brethren.

Correct
Marks for this submission: 1/1.Question 18
Marks: 1 In assessing Alexander's claim in Q17 above, is the court likely to find:
Choose one answer. A. Breach of the common duty of care under the Occupiers' Liability Act 1957
B. Breach of the section 1 duty of care under the Occupiers' Liability Act 1984
C. That Alexander cannot succeed under either Occupiers' Liability Act
D. That Alexander has a good claim for negligence
E. Don't know
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That's correct.
In Tomlinson v Congleton BC [2004] 1 A.C. 46, the House of Lords was of the view that Mr Tomlinson's injury had not arisen from any danger due to the state of the premises or to things done or omitted to be done on them and so his claim fell outside both the 1984 and 1957 Act. In the words of Lord Hoffmann, 'Mr Tomlinson was a person of full capacity who voluntarily and without any pressure or inducement engaged in an activity which had inherent risk. The risk was that he might not execute his dive properly and so sustain injury. Likewise, a person who goes mountaineering incurs the risk that he might stumble or misjudge where to put his weight. In neither case can the risk be attributed to the state of the premises. Otherwise any premises can be said to be dangerous to someone who chooses to use them for some dangerous activity. In the present case, Mr Tomlinson knew the lake well and even if he had not, the judge's finding was that it contained no dangers which one would not have expected. So the only risk arose out of what he chose to do and not out of the state of the premises'.

Correct
Marks for this submission: 1/1.Question 19
Marks: 1 Clarence decides to buy a house in the country and finds a cottage next to a lake in a beautiful location. He is delighted and moves in immediately. When Spring arrives, however, he is disturbed by the constant buzz of jet-skis on the lake. He discovers that there is a local jet-ski club, which is about to host an international competition lasting a week. The club has received support from the local council for its activities and encourages local youths to take part in this growing sport.

Which of the following is a court most likely to find?

Choose one answer. A. That there is a nuisance, but an injunction on terms would be the correct response
B. That there is a nuisance, but damages would be an adequate remedy
C. That there is no nuisance due to the public utility of the club's activities, as recognised by the local council
D. That there is no nuisance because the club has permission from the council for its activities
E. Don't know
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The correct answer is "that there is a nuisance, but an injunction on terms would be the correct response".

The noise is likely to amount to a private nuisance. Any public utility or support from the council will not prevent a court finding a nuisance. However, the court will consider the public utility of the club's activities in assessing which remedy to give. Whilst Miller v Jackson [1977] Q.B. 966 suggests that the court would be reluctant in such circumstances to grant an injunction, the later case of Kennaway v Thompson [1981] Q.B. 88 suggests a more robust approach. In that case, the Court of Appeal was not prepared to allow the public interest to prevail over the private interest, but did not grant an absolute injunction, but chose to grant an injunction on terms which specified when motor-boat racing would be permitted on the lake. A similar result is likely to be achieved here.

Incorrect
Marks for this submission: 0/1.Question 20
Marks: 1 Dominic wishes to complain about the conduct of his neighbour, Elspeth. During a recent storm, a tree on her land was struck by lightning and set on fire. Elspeth cut down the tree which extinguished the fire and then rushed to catch a train to visit her aunt. In her absence, the wind picked up and reignited the fire which has now spread to Dominic's land and damaged his crops. Which of the following would suggest that Elspeth will be found liable in private nuisance?
Choose one answer. A. It is proved that a tree on her land caused the damage
B. It is proved that the fire caused a nuisance to Dominic's land
C. It is proved that she failed to take reasonable steps to deal with the fire
D. It is proved that she failed to take reasonable steps to deal with the fire in the light of her personal resources and ability to act
E. Don't know
Feedback
That's correct.
In Goldman v Hargrave [1967] 1 A.C. 645, Lord Wilberforce found similar conduct to amount to a continuation of the nuisance. A 'measured duty of care' would arise to deal with natural hazards which could foreseeably harm another: 'the standard ought to be to require of the occupier what it is reasonable to expect of him in his individual circumstances. Thus, less must be expected of the infirm than of the able-bodied: the owner of a small property where a hazard arises which threatens a neighbour with substantial interests should not have to do so much as one with larger interests of his own at stake and greater resources to protect them: if the small owner does what he can and promptly calls on his neighbour to provide additional resources, he may be held to have done his duty: he should not be liable unless it is clearly proved that he could, and reasonably in his individual circumstance should, have done more' (at page 663). In Goldman, the occupier was found liable for merely cutting down a tree when he could easily have prevented any subsequent re-ignition of the fire by dowsing it with water.

Correct
Marks for this submission: 1/1.

Transco plc (formerly BG plc and BG Transco plc) (Appellants) v. Stockport Metropolitan Borough Council (Respondents)

2009-04-29T09:09:00.000-07:00

HOUSE OF LORDS
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
Transco plc (formerly BG plc and BG Transco plc) (Appellants) v. Stockport Metropolitan Borough Council (Respondents)
[2003] UKHL 61
LORD BINGHAM OF CORNHILL
My Lords,
1. In this appeal the House is called upon to review the scope and application, in modern conditions, of the rule of law laid down by the Court of Exchequer Chamber, affirmed by the House of Lords, in Rylands v Fletcher (1866) LR 1 Exch 265; (1868) LR 3 HL 330.
2. I need not repeat the summary given by my noble and learned friend Lord Hoffmann of the facts giving rise to the dispute between the parties to this appeal. The salient facts appear to me to be these. As a multi-storey block of flats built by a local authority and let to local residents, Hollow End Towers was typical of very many such blocks throughout the country. It had been built by the respondent council. The block was supplied with water for the domestic use of those living there, as statute has long required. Water was carried to the block by the statutory undertaker, from whose main the pipe central to these proceedings led to tanks in the basement of the block for onward distribution of the water to the various flats. The capacity of this pipe was much greater than the capacity of a pipe supplying a single dwelling, being designed to meet the needs of 66 dwellings. But it was a normal pipe in such a situation and the water it carried was at mains pressure. Without negligence on the part of the council or its servants or agents, the pipe failed at a point within the block with the inevitable result that water escaped. Since, again without negligence, the failure of the pipe remained undetected for a prolonged period, the quantity of water which escaped was very considerable. The lie and the nature of the council's land in the area was such that the large quantity of water which had escaped from the pipe flowed some distance from the block and percolated into an embankment which supported the appellant Transco's 16-inch high-pressure gas main, causing the embankment to collapse and leaving this gas main exposed and unsupported. There was an immediate and serious risk that the gas main might crack, with potentially devastating consequences. Transco took prompt and effective remedial measures and now seeks to recover from the council the agreed cost of taking them.
Rylands v Fletcher
3. Few cases in the law of tort or perhaps any other field are more familiar, or have attracted more academic and judicial discussion, than Rylands v Fletcher. This relieves me of the need both to summarise the well-known facts of the case and to
rehearse yet again the passages cited by Lord Hoffmann in which Blackburn J (1868) LR 1 Exch 265, 279 and Lord Cairns LC (1868) LR 3 HL 330, 338-339 expressed the ratio of their decisions. I content myself with three points, none of them controversial:
(1) The plaintiff framed his claim as one of negligence: see (1866) LR 1 Exch 265. It was only when a majority of the Court of Exchequer (Pollock CB and Martin B, Bramwell B dissenting: (1865) 3 H & C 774), held against him, ruling that no claim would lie in the absence of negligence, that the plaintiff changed tack and contended that defendants were liable even if negligence could not be established against them.
(2) Blackburn J did not conceive himself to be laying down any new principle of law. When, in Ross v Fedden (1872) 26 LT 966, 968, it was later suggested to him by counsel that the question in Rylands v Fletcher had never been decided until the adjudication of that case, he rejected the suggestion in robust terms. The Lord Chancellor regarded the principles on which the case was to be determined as "extremely simple": (1868) LR 3 HL 330, 338. Had the House regarded the case as raising issues of great moment, steps might no doubt have been taken to assemble a stronger quorum to hear the appeal: see Heuston, "Who was the Third Lord in Rylands v Fletcher?" (1970) 86 LQR 160-165. It seems likely, as persuasively contended by Professor Newark ("The Boundaries of Nuisance" (1949) 65 LQR 480, 487-488), that those who decided the case regarded it as one of nuisance, novel only to the extent that it sanctioned recovery where the interference by one occupier of land with the right or enjoyment of another was isolated and not persistent.
(3) Those involved in Rylands v Fletcher, as counsel or judges, must have been very much alive to the catastrophic results which may ensue when reservoir dams burst. Professor Brian Simpson has drawn attention ("Legal Liability for Bursting Reservoirs: The Historical Context of Rylands v Fletcher" (1984) 13 Journal of Legal Studies 209) to two such catastrophes, one in 1852, some eight years before the inundation of Mr Fletcher's colliery, the second in 1864, after Fletcher's case had been heard at first instance but before the hearing in the three appellate courts. In the Court of Exchequer Chamber, Blackburn J expressly referred to the case of damage done by the bursting of waterworks companies' reservoirs: (1866) LR 1 Exch 265, 270. Lord Cairns, as Sir Hugh Cairns QC, had advised on the payment of compensation when the second disaster occurred. No matter how broadly the principle was expressed when judgment was given, the risk of escape of water from an artificially constructed reservoir was one which the judges must have had vividly in mind. The damage suffered by Fletcher was not the result of a dam failure, but nor was Rylands' reservoir a mere pond: inspecting it before writing his article, Simpson found it still in use, with a capacity of over 4 million gallons and covering 1½ acres when full.
The future development of Rylands v Fletcher
4. In the course of his excellent argument for the council, Mr Mark Turner QC canvassed various ways in which the rule in Rylands v Fletcher might be applied and developed in future, without however judging it necessary to press the House to accept any one of them. The boldest of these courses was to follow the trail blazed by a majority of the High Court of Australia in Burnie Port Authority v General Jones Property Ltd (1994) 120 ALR 42 by treating the rule in Rylands v Fletcher as absorbed by the principles of ordinary negligence. In reaching this decision the
majority were influenced by the difficulties of interpretation and application to which the rule has undoubtedly given rise (pp 52-55), by the progressive weakening of the rule by judicial decision (pp 54-55), by recognition that the law of negligence has been very greatly developed and expanded since Rylands v Fletcher was decided (pp 55-65) and by a belief that most claimants entitled to succeed under the rule would succeed in a claim for negligence anyway (pp 65-67).
5. Coming from such a quarter these comments of course command respect, and they are matched by expressions of opinion here. Megaw LJ observed in Leakey v National Trust for Places of Historic Interest or Natural Beauty [1980] QB 485 at 519 that application of the decision and of the dicta in Rylands v Fletcher had given rise to continual trouble in the law of England. In its report on Civil Liability for Dangerous Things and Activities (1970) (Law Com No 32), p 12, para 20(a) the Law Commission described the relevant law as "complex, uncertain and inconsistent in principle". There is a theoretical attraction in bringing this somewhat anomalous ground of liability within the broad and familiar rules governing liability in negligence. This would have the incidental advantage of bringing the law of England and Wales more closely into line with what I understand to be the law of Scotland (see RHM Bakeries (Scotland) Ltd v Strathclyde Regional Council 1985 SLT 214, 217, where Lord Fraser of Tullybelton described the suggestion that the decision in Rylands v Fletcher had any place in Scots law as "a heresy which ought to be extirpated"). Consideration of the reported English case law over the past 60 years suggests that few if any claimants have succeeded in reliance on the rule in Rylands v Fletcher alone.
6. I would be willing to suppress an instinctive resistance to treating a nuisance-based tort as if it were governed by the law of negligence if I were persuaded that it would serve the interests of justice to discard the rule in Rylands v Fletcher and treat the cases in which it might have been relied on as governed by the ordinary rules of negligence. But I hesitate to adopt that solution for four main reasons. First, there is in my opinion a category of case, however small it may be, in which it seems just to impose liability even in the absence of fault. In the context of then recent catastrophes Rylands v Fletcher itself was understandably seen as such a case. With memories of the tragedy at Aberfan still green, the same view might now be taken of Attorney General v Cory Brothers and Co Ltd [1921] 1 AC 521 even if the claimants had failed to prove negligence, as on the facts they were able to do. I would regard Rainham Chemical Works Ltd v Belvedere Fish Guano Co Ltd [1921] 2 AC 465, and Cambridge Water Co v Eastern Counties Leather Plc [1994] 2 AC 264 (had there been foreseeability of damage), as similarly falling within that category. Second, it must be remembered that common law rules do not exist in a vacuum, least of all rules which have stood for over a century during which there has been detailed statutory regulation of matters to which they might potentially relate. With reference to water, section 209 of the Water Industry Act 1991 imposes strict liability (subject to certain exemptions) on water undertakers and Schedule 2 to the Reservoirs Act 1975 appears to assume that on facts such as those of Rylands v Fletcher strict liability would attach. If the law were changed so as to require proof of negligence by those previously thought to be entitled to recover under the rule in Rylands v Fletcher without proving negligence, the effect might be (one does not know) to falsify the assumption on which Parliament has legislated, by significantly modifying rights which Parliament may have assumed would continue to exist. Third, although in
Cambridge Water [1994] 2 AC 264, 283-285, the possibility was ventilated that the House might depart from Rylands v Fletcher in its entirety, it is plain that this suggestion was not accepted. Instead, the House looked forward to a more principled and better controlled application of the existing rule: see, for example, p 309. While this is not a conclusive bar to acceptance of the detailed argument presented to the House on this occasion, "stop-go" is in general as bad an approach to legal development as to economic management. Fourth, while replacement of strict Rylands v Fletcher liability by a fault-based rule would tend to assimilate the law of England and Wales with that of Scotland, it would tend to increase the disparity between it and the laws of France and Germany. Having reviewed comparable provisions of French and German law, van Gerven, Lever and Larouche (Cases, Materials and Text on National, Supranational and International Tort Law (2000), p 205) observe:
"Even if the contours of the respective regimes may differ, all systems studied here therefore afford a form of strict liability protection in disputes between neighbouring landowners."
The authors indeed suggest (p 205) that the English rule as laid down in Rylands v Fletcher is "the most developed of these regimes".
7. Should, then, the rule be generously applied and the scope of strict liability extended? There are certainly respected commentators who favour such a course and regret judicial restrictions on the operation of the rule: see Fleming, The Law of Torts, 9th ed (1998), p 377; Markesinis and Deakin, Tort Law, 5th ed (2003), p 544. But there is to my mind a compelling objection to such a course, articulated by Lord Goff of Chieveley in Cambridge Water [1994] 2 AC 264, 305:
"Like the judge in the present case, I incline to the opinion that, as a general rule, it is more appropriate for strict liability in respect of operations of high risk to be imposed by Parliament, than by the courts. If such liability is imposed by statute, the relevant activities can be identified, and those concerned can know where they stand. Furthermore, statute can where appropriate lay down precise criteria establishing the incidence and scope of such liability."
It may be added that statutory regulation, particularly when informed by the work of the Law Commission, may take such account as is judged appropriate of the comparative law considerations on which I have briefly touched.
8. There remains a third option, which I would myself favour: to retain the rule, while insisting upon its essential nature and purpose; and to restate it so as to achieve as much certainty and clarity as is attainable, recognising that new factual situations are bound to arise posing difficult questions on the boundary of the rule, wherever that is drawn.
9. The rule in Rylands v Fletcher is a sub-species of nuisance, which is itself a tort based on the interference by one occupier of land with the right in or enjoyment of land by another occupier of land as such. From this simple proposition two consequences at once flow. First, as very clearly decided by the House in Read v J Lyons & Co Ltd [1947] AC 156, no claim in nuisance or under the rule can arise if the
events complained of take place wholly on the land of a single occupier. There must, in other words, be an escape from one tenement to another. Second, the claim cannot include a claim for death or personal injury, since such a claim does not relate to any right in or enjoyment of land. This proposition has not been authoritatively affirmed by any decision at the highest level. It was left open by Parker LJ in Perry v Kendricks Transport Ltd [1956] 1 WLR 85, 92, and is inconsistent with decisions such as Shiffman v Order of St John of Jerusalem [1936] 1 All ER 557 and Miles v Forest Rock Granite Co (Leicestershire) Ltd (1918) 34 TLR 500. It is however clear from Lord Macmillan's opinion in Read at pp 170-171 that he regarded a personal injury claim as outside the scope of the rule, and his approach is in my opinion strongly fortified by the decisions of the House in Cambridge Water [1994] 2 AC 264 and Hunter v Canary Wharf Ltd [1997] AC 655, in each of which nuisance was identified as a tort directed, and directed only, to the protection of interests in land.
10. It has from the beginning been a necessary condition of liability under the rule in Rylands v Fletcher that the thing which the defendant has brought on his land should be "something which . . . will naturally do mischief if it escape out of his land" ((1865) LR 1 Exch 265, 279 per Blackburn J), "something dangerous … " (ibid), "anything likely to do mischief if it escapes … " (ibid), "something … harmless to others so long as it is confined to his own property, but which he knows to be mischievous if it gets on his neighbour's …" (ibid, at p 280), "… anything which, if it should escape, may cause damage to his neighbour . . ." ((1868) LR 3 HL 330, 340 per Lord Cranworth). The practical problem is of course to decide whether in any given case the thing which has escaped satisfies this mischief or danger test, a problem exacerbated by the fact that many things not ordinarily regarded as sources of mischief or danger may nonetheless be capable of proving to be such if they escape. I do not think this condition can be viewed in complete isolation from the non-natural user condition to which I shall shortly turn, but I think the cases decided by the House give a valuable pointer. In Rylands v Fletcher itself the courts were dealing with what Lord Cranworth ((1868) LR 3 HL 330, 342) called "a large accumulated mass of water" stored up in a reservoir, and I have touched on the historical context of the decision in paragraph 3(3) above. Rainham Chemical Works [1921] 2 AC 465, 471, involved the storage of chemicals, for the purpose of making munitions, which "exploded with terrific violence". In Attorney General v Cory Brothers and Co Ltd [1921] 1 AC 521, 525, 530, 534, 536, the landslide in question was of what counsel described as an "enormous mass of rubbish", some 500,000 tons of mineral waste tipped on a steep hillside. In Cambridge Water [1994] 2 AC 264 the industrial solvents being used by the tannery were bound to cause mischief in the event, unforeseen on the facts, that they percolated down to the water table. These cases are in sharp contrast with those arising out of escape from a domestic water supply (such as Carstairs v Taylor (1871) LR 6 Exch 217, Ross v Fedden (1872) 26 LT 966 or Anderson v Oppenheimer (1880) 5 QBD 602) which, although decided on other grounds, would seem to me to fail the mischief or danger test. Bearing in mind the historical origin of the rule, and also that its effect is to impose liability in the absence of negligence for an isolated occurrence, I do not think the mischief or danger test should be at all easily satisfied. It must be shown that the defendant has done something which he recognised, or judged by the standards appropriate at the relevant place and time, he ought reasonably to have recognised, as giving rise to an exceptionally high risk of danger or mischief if there should be an escape, however unlikely an escape may have been thought to be.
11. No ingredient of Rylands v Fletcher liability has provoked more discussion than the requirement of Blackburn J ((1866) LR 1 Exch 265, 280) that the thing brought on to the defendant's land should be something "not naturally there", an expression elaborated by Lord Cairns ((1868) LR 3 HL 330, 339) when he referred to the putting of land to a "non-natural use": see Stallybrass, "Dangerous Things and the Non-Natural User of Land" (1929) 3 CLJ 376-397; Goodhart, "Liability for Things Naturally on the Land" (1932) 4 CLJ 13-33; Newark, "Non-Natural User and Rylands v Fletcher" (1961) 24 MLR 557-571; Williams, "Non-Natural Use of Land" [1973] CLJ 310-322; Weir, "Rylands v Fletcher Reconsidered" [1994] CLJ 216. Read literally, the expressions used by Blackburn J and Lord Cairns might be thought to exclude nothing which has reached the land otherwise than through operation of the laws of nature. But such an interpretation has been fairly described as "redolent of a different age" (Cambridge Water [1994] 2 AC 264, 308), and in Read v J Lyons & Co Ltd [1947] AC 156, 169, 176, 187 and Cambridge Water at p 308 the House gave its imprimatur to Lord Moulton's statement, giving the advice of the Privy Council in Rickards v Lothian [1913] AC 263, 280:
"It is not every use to which land is put that brings into play that principle. It must be some special use bringing with it increased danger to others, and must not merely be the ordinary use of the land or such a use as is proper for the general benefit of the community."
I think it clear that ordinary user is a preferable test to natural user, making it clear that the rule in Rylands v Fletcher is engaged only where the defendant's use is shown to be extraordinary and unusual. This is not a test to be inflexibly applied: a use may be extraordinary and unusual at one time or in one place but not so at another time or in another place (although I would question whether, even in wartime, the manufacture of explosives could ever be regarded as an ordinary user of land, as contemplated by Viscount Simon, Lord Macmillan, Lord Porter and Lord Uthwatt in Read v J Lyons & Co Ltd [1947] AC 156, 169-170, 174, 176-177, 186-187). I also doubt whether a test of reasonable user is helpful, since a user may well be quite out of the ordinary but not unreasonable, as was that of Rylands, Rainham Chemical Works or the tannery in Cambridge Water. Again, as it seems to me, the question is whether the defendant has done something which he recognises, or ought to recognise, as being quite out of the ordinary in the place and at the time when he does it. In answering that question, I respectfully think that little help is gained (and unnecessary confusion perhaps caused) by considering whether the use is proper for the general benefit of the community. In Rickards v Lothian itself, the claim arose because the outflow from a wash-basin on the top floor of premises was maliciously blocked and the tap left running, with the result that damage was caused to stock on a floor below: not surprisingly, the provision of a domestic water supply to the premises was held to be a wholly ordinary use of the land. An occupier of land who can show that another occupier of land has brought or kept on his land an exceptionally dangerous or mischievous thing in extraordinary or unusual circumstances is in my opinion entitled to recover compensation from that occupier for any damage caused to his property interest by the escape of that thing, subject to defences of Act of God or of a stranger, without the need to prove negligence.
The present appeal
12. By the end of the hearing before the House, the dispute between the parties had narrowed down to two questions: had the council brought on to its land at Hollow End Towers something likely to cause danger or mischief if it escaped? and was that an ordinary user of its land? Applying the principles I have tried to outline, I think it quite clear that the first question must be answered negatively and the second affirmatively, as the Court of Appeal did: [2001] EWCA Civ 212.
13. It is of course true that water in quantity is almost always capable of causing damage if it escapes. But the piping of a water supply from the mains to the storage tanks in the block was a routine function which would not have struck anyone as raising any special hazard. In truth, the council did not accumulate any water, it merely arranged a supply adequate to meet the residents' needs. The situation cannot stand comparison with the making by Mr Rylands of a substantial reservoir. Nor can the use by the council of its land be seen as in any way extraordinary or unusual. It was entirely normal and routine. Despite the attractive argument of Mr Ian Leeming QC for Transco, I am satisfied that the conditions to be met before strict liability could be imposed on the council were far from being met on the facts here.
14. I would accordingly dismiss the appeal with costs.