What's Your Problem?

Ways to Market Your Invention

2011-05-14T18:23:00.000-07:00

GRANTING of a patent does not guarantee commercial success no matter how ingenious your invention is. There are many factors other than patent protection involved in the commercial success of a product.

Obtaining a patent is only the first in a series of steps by the patent owner to make a commercial success of his or her invention. The common saying 10 per cent inspiration and 90 per cent perspiration holds true when getting a patented invention into the market.

Marketing and commercializing is a crucial stage of an invention and could determine whether that invention that was supposed to make people’s lives easier actually gets brought by those same people for whom it was intended!

Marketing and commercializing and invention is an expensive affair. One way is to take a major gamble and go into it alone. The individual inventor would surely be short of cash. A more popular method of raising funds is to get into a joint venture either with a partner (doesn’t matter if he is a sleeping partner or an active one, as long as he is rich!)

There are however many government grants available today to the inventor who has a solid idea and a solid business plan. Next on the lists are venture capitalists and finally banks.

The other option available to the inventor is to sell his idea by way of licencs or assignments to others and let them develop and market the product. In this way, he is able to make some money by collecting either royalties or lump sum payments. In the process he may lose control over the future of the object of his invention, but you win a few, lose a few – right?

How To File A Patent Application - Published in the New Straits Times, Malaysia in 1993 under the coloumn Patents Patenting by Justin Santiago

2011-05-14T18:18:00.000-07:00

MOST people will stop from making that all-important step of filing a patent application either because their idea is too “strange”, they think it costs too much, or simply because they don’t know how.

To those hesitant inventors, here is some good news for you.

No idea is too strange. Patents have been applied for chewable chopsticks,
transparent greeting cards and “spring boots” for speed walking.
A patent application costs a few hundred ringgit if you do the application yourself. As for the last worry, this column is here to teach you how to apply for a patent.
Any person may make an application for a patent either alone or jointly with another.

Applying for a patent is a fairly simple process. The most important item of a patent application which you will have to prepare is the patent specification. The patent specification explains the invention in detail and defines the scope of the protection.

A patent specification consists of the following:

1. Title
2. Description of the invention
3. Claim or claims
4. Drawings (if necessary)
5. Abstract

The title usually describes the invention in a very concise form. There is no need to indentify all the fields of invention. Sometimes titles are sufficiently vague to avoid giving information to competitors in countries where the title can picked up before publication (Malaysia is one of them).

The description teaches the invention to the public.

The description and the drawings (if there are any) describe the invention.
It is drafted in detail and related to one or two preferred examples of the invention.
The description will usually have a general part which starts with the closest relevant prior art, goes on by mentioning how the invention improves on the shortcomings of the prior art and finally the invention itself.

Drawings are used to illustrate specific embodiments of the invention.

The claims define the monopoly upon which the public cannot infringe.
They are drafted in broad scope and the subsequent claims progressively narrow down the scope of the main claim.

The abstract is a condensed version of the technological information already covered in the description.

Drafting a patent specification is a highly skilled art as the writer must not only know the subject matter well but he must also clearly define what protection is being sought.
The contents of a patent specification can be the deciding factor when a patent infringement case goes to court. It is possible to prepare and file a patent application and to prosecute it through to grant of patent without professional assistance.
However, obtaining a commercially-useful patent requires a high level of expertise and anyone who is not thoroughly experienced in patent matters is advised to employ a patent agent.

The Role of A Patent Agent

The role of the patent agent is to provide professional services to inventors in respect of:
• advice relating to an invention in the pre-application phase;
• service and advice during the application phase; and
• representation and advice in the post-grant phase

Once the decision to file an application is made the patent agent’s services and advice is particularly useful in drafting the description and claims. It is the function of the claims of the patent application to define the scope of the protection of the monopoly being sought. The patent agent’s skill and experience are important to drafting claims to ensure that they protect the inventor’s rights by covering the invention in the broadest possible way.At the same time the claims must not be so broad that they cover anything which is already known or which does not work.

Patents and Intellectual Property - ublished in the New Straits Times, Malaysia in 1993 under the coloumn Patents Patenting by Justin Santiago

2011-05-14T18:12:00.000-07:00

PATENTS come under the general heading of intellectual property. Intellectual property is the collective name given to legal rights which protect the fruits of a person’s intellect which can be an invention, a trademark, an artistic work or a design.
One of the earliest patents was granted in the Republic of Florence, Italy, way back in 1492. With the coming of the Industrial Revolution the concept of patents became an important means of encouraging industrial inventions and innovations.

What is a Patent?

Most inventors want to make money from their ideas or at least get them into use. “Can the A-bomb that I invented in my backyard be patented?”, shouts one inventor. “What do I do with my patent for a battery-operated stubble puller?”, cries another.

Patenting has never been an easy business but there is plenty to gain for those who have a first-class idea and who are determinated to make it happen – provided it is original in the first place. What exactly is a patent? Patents are documents conferred by the state upon the inventor which give him the exclusive right to exploit his invention in exchange for providing a full disclosure of his invention.

A patent gives to the owner of the patent the right to prevent others from making, using or selling the invention for as long as the patent remains in force, which in Malaysia is 15 years.The relevant bodies entrusted with the task of processing patent applications and granting patents are the Patents Board and the Patents Registration Office in the Ministry of Internal Trade and Consumer Affairs.

Applications for a patent must be made at the Patents Registration Office and the patent application will be processed, examinated, approved or rejected on its own merits. If a patent application is successful a certificate of grant is issued.
An unsuccessful patent application does not mean that your idea stinks. It simply means that someone else beat you to it!
Inventors come in all sorts of shapes and sizes. Thomas Edison was one of the more prolific inventors coming up with more than a thousand patented inventions before his death in 1831. Then there were the three Terengganu school-boys who invented what is probably the world’s first onion peeler which does the job perfectly minus the tears. Or businessman Anil Vora who specializes in mostly low-tech inventions, who has already come up with 100 inventions, including an easy-to suck baby bottle which prevents babies from burping too much and a non-flip umbrella which doesn’t flip inside out when blown by a gust of wind.

Examples of patented inventions are as varied as the inventors who think about them. They do not have to be as complicated as the jet engine which drives an air-craft. In Fact some of the simplest inventions are sometimes some of the most useful. One example is a button which may be secured to cloth without the necessity of using thread- the brainchild of three local inventors.

There is an unfortunate tendercy in the public mind to associate inventions with gadgets and gimmicks along the lines of the beer-making machine from the movie Young Einstein. However, virtually all machines, apparatus, products and processes across the industrial board are patentable provided that they satisfy three criteria: They must be new; in other words you cannot reinvent the wheel.

They must exhibit an inventive step, which means it would not have been obvious to a skilled man in that particular field.
It must be industrially applicable which means there must be a use for it.

There are however certain categories of inventions that are unpatentable. They are scientific theories, mathematical methods, plant or animal varieties, business methods, methods of treating human or animal bodies by surgery or therapy and inventions which are contrary to public order and prejudicial to the interest and security of the nation.

Innovation and Creativity - Pride of the Nation

2010-12-01T09:57:00.000-08:00

Innovation and Creativity - Pride of the Nation

The most successful nations in the world all have one thing in common – they all have an innovation culture. This culture is one where innovation and creativity are valued and appreciated, adequately funded and protected.

Leveraging natural creativity or spontaneous innovation for financial gain and national economic growth requires appropriate institutional support which is much more than merely funding. It requires a climate, and a culture, that is supportive of R&D; where a certain amount of risk-taking is balanced by the use of market discipline and good practices to identify the best products and services to bring to market, or the most efficient programs for governments to deploy.

The level and depth of a country’s innovation culture can be measured by several criteria that include economic, social, health and educational factors. One of the most reliable indicators of innovation in a particular country or region is patenting activity. Patents are a key measure of the extent and success of an innovation culture. They reflect inventive performance,
they can track the diffusion of knowledge, and they are good indicators of the level of internationalization, regionalization and nationalization of innovation activities. They can be used to measure the level of R&D activities, and ultimately, how effective those are, what structure they are taking, and which industries appear to be successful, and which not.

Patent applications in Malaysia in recent years by local inventors has shown spectacular growth in the last 5 years with applications more than doubling from 522 applications in 2005 to 1234 applications in 2009. It would appear that efforts to create a more conducive environment for local innovation and creativity is beginning to bear fruit.

But we need to look further – how can we as a nation further enhance the climate in which innovation and creativity are the norm rather than the desired goal? How can Malaysia integrate into its national policies and economic development agenda those innovation and creativity mechanisms and platforms which will bring about the desired results?

Innovation and creativity will only move if there is an incentive for the innovator or creator. It is harder for an invention to see the light of day if there is no commercial value. In order to stimulate innovation and creativity we have to policies in place that would stimulate the commercialization of these innovations.

For instance if we can have directives that would ensure that government departments only procure locally invented products provided that the technology meets a certain standard and the price is competitive and that continued procurement will only happen if there is continuous innovation and improvement in quality.

We can make sure that all national projects utilize local innovations as much as possible. In this regard Proton was going the right way when it came up with Satria Neo and Proton Persona after two decades of rebadging outdated Mitsubishis. However the latest move by Proton to revert back to its initial strategy does not augur well for local innovation and instead of providing a vehicle for local innovations to ride on is merely licensing innovations from overseas.

I need to add this point here about innovation. Early prototypes of innovations or early models are high on inventiveness but low on quality. If you look at the early Toyotas and Hyundais they were ugly and could get you into serious trouble if you were involved in an accident. However perseverance and a firm faith in the technology and innovation behind these new machines as well as some protectionist policies ensured that subsequent models improved on quality and performance and today these cars have captured the world market – Toyota is the world’s largest car manufacturer and Hyundai is a respectable fourth after producing the first Korean car in 1975 merely 10 years before Proton.

We are coming to the end of Malaysia Innovative 2010, a year dedicated to encouraging local inventions. Let us not stop at the idea or the proptotype. Let us look at putting policies in place to ensure they have commercial viability. We need to be surrounded by Malaysian innovations just like the US, UK, Japan and Korea are surrounded by innovations developed in their respective countries. Only then can we look forward to a truly developed nation by 2020.

Branding Made Easy

2010-11-30T21:48:00.000-08:00

Branding Made Easy

A company may have come up with an excellent product or service, but if it cannot communicate the message clearly they will remain as a small company with a good product with a limited reach. Just sit down and think about your favourite noodle stall, barber shop or plumber. Do you remember the name of their company or their brand name? Probably not.

Branding sounds like a big word to a small company but it is actually nothing more than targeted, repeated and effective communications about products or services. Branding will go a long way towards communicating your business to the market. A good branding exercise will eventually convert them into customers.

There are many ways to run a branding campaign but we shall narrow it down to the simplest, most cost efficient and effective essentials :-

1. Corporate Brochure
2. Website
3. Name Card

Each of these items carries the same consistent message and is an effective opener to any meeting, conversation or email.

Putting your entire business on paper may not be the easiest thing to do. However it is a must to sit down and put yourself in the client's shoes and work out all the details of what is it that you can do for your client.

Revamp of Blog

2010-11-10T03:47:00.001-08:00

Dear Followers and Readers

We are going to be improving the blog considerably in the next two weeks to be more encompassing. While the blog will be true to its original aim of clarifying legal issues we now want to move to the next level and focus on a broader range of subjects that will help individuals and organizations achieve their highest potential.

Please bear with us as we go through this transformation process.

Regards

Justin Santiago

What are the advantages and disadvantages of arbitration when compared with Court litigation ?

2009-08-23T02:43:00.000-07:00

If you have ever had your day in court, you would probably have wished you had never been a party to litigation. The incessant delays, complex procedures, lack of direct involvement and heavy costs are enough to put one off seeking justice in this manner. It would seem that a trial is a rather effective deterrent to seeking justice!

The commonly held view is that arbitration, a form of alternative dispute resolution outside the formal structure of law and court procedure, would provide a suitable alternative that was just, accessible, efficient, timely and effective. The matter is referred to a third party, either an arbitrator or a tribunal consisting of three arbitrators, who will grant an award which the parties are obliged to honour. Should a party fail to honour the award, the other party may still seek relief from the courts.

This essay will discuss some of the advantages of arbitration over court litigation which are most important to the parties and the reasons why they are so. Some of the disadvantages will also be highlighted.

Efficacy

There are two elements to efficacy in the context of arbitration : firstly as a speedy means of resolving conflict and secondly maintaining the continuity of relationship between the parties having the dispute.

Section 1 of the Arbitration Act 1996 practiced in England, Wales and Northern Ireland sets out clearly that the objective of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense. Because arbitration does not go through the inflexibility of scheduling inherent in the court system and arbitrators in principle have more flexible schedules than judges here is less likelihood of there being a delay. Parties have greater control over the timing of the arbitration proceedings.

Arbitration also leads to faster resolution because the proceedings are less formal than a court case. There is also only a limited right of appeal against arbitration awards thus ensuring that the dispute is not prolonged by a long appeal process which can mean swifter enforcement and less scope for a party to delay matters. For the parties the quicker a dispute is resolved, the faster they can focus on their core business.

Court proceedings tend to terminally rupture business relationships where the courts act as an umpire over the lawyers who dictate the intention of the parties resulting in the predominance of a boxing ring culture over a solution seeking culture. Litigation encourages a desire for vindication and public acknowledgement of a wrong suffered.
Ultimately there is one winner and one loser which is not the preferred outcome for parties having a high degree of mutuality and interdependency. Therefor parties which are very closely interlinked and want to maintain their relationship would prefer the arbitration route over court litigation.

Flexibility

Litigation is a highly formalized process with specialized rules and requires compliance by both parties failing which the court proceedings are held up. Arbitration is less formal than court proceedings and the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate if the parties fail to agree on the procedure to be followed (Article 19 of the Model Law on International Commercial Arbitration).

The arbitration route allows the tribunal to adopt the inquisitorial system which involves search for the truth largely through the tribunal’s own investigations if it feels it is necessary. The advantage of the inquisitorial system is evident from the strong support for it at the level of the Small Claims Courts in the UK where arbitrators now take a more interventionist approach.1 The adversarial method of proceeding inherent in the Common Law system practiced in much of the English speaking world takes a longer time to gather evidence than the inquisitorial system.

Parties are attracted to the less formal nature of arbitration which encourages a speedier and hence less costly way of settling disputes. However, lately, arbitration has been criticised for copying court litigation and as arbitration has developed, the procedures too have become as complicated. It is hoped that the UNCITRAL Notes on Organizing Arbitral Proceedings 1996 will weed out potential problem areas.

Ability to Select Venue, Seat and Language of the Arbitration

The flexibility of arbitration extends to the freedom to choose the venue of the arbitration whether in the contract’s arbitration agreement itself or at a later stage. This decision allows parties from different legal jurisdictions and different legal systems to pick a neutral venue or a venue that is aritration-friendly or convenient for them.

The parties may also decide on the seat of the arbitration i.e. the legal jurisdiction to which the arbitration is tied. The seat dictates which national law governs the procedure. The seat of arbitration need not be in the same country as the venue, although in practice they are often the same. The seat of the arbitration is significant since it will normally determine the procedure or rules which the arbitration adopts, and the courts which exercise jurisdiction over the seat will have a supervisory role over the conduct of the arbitration. By selecting a given state as the place of arbitration, the parties place the process within the framework of that country’s mandatory national laws applicable to arbitration.

For parties of different legal jurisdictions having a single seat avoids the complications relating to conflicting laws. For example London remains one of the most popular jurisdictions for international arbitration due to the availability of fairly extensive supportive measures from the court, a lack of court intervention restricting party autonomy and a comprehensive regime in the form of the 1996 Act.

There will be certainty as to the extent by which the national court will support or intervene in the arbitral process and the extent of judicial review available to the parties. The finality of the award will also be certain and between commercial parties, finality is a priority.

Agreeing to arbitration also allows the parties to pick the language in which they would like the proceedings to be conducted. Unlike the situation where a dispute is litigated, the place of arbitration does not predetermine the language and parties can agree on the language that is most convenient.

Parties who desire more control of the setting in which the dispute is conducted as opposed to allowing the court system to determine would prefer the arbitration route.

Uniformity of the Law

As arbitration becomes an increasingly popular form of alternate dispute resolution this had led to more countries legislating laws which govern the conduct of arbitration held in that country based on the UNCITRAL Model Law on International Commercial Arbitration 1985 and the UCITRAL Arbitration Rules 1976. As a result there is growing uniformity of legislation pertaining to arbitration around the world.

Parties would feel secure knowing that the seat of arbitration that has legislation based on the Model Law would follow certain general principles outlined in the Model Law.

Enforcement of the Award

In terms of enforcement, the provisions of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) make arbitration awards generally easier to enforce abroad than court judgments. There are more than 140 signatory states to the convention that have agreed to recognise and enforce awards made in territories of other signatory states.

Due to the international recognition and support that arbitration has achieved, there is widespread acceptance that agreements to refer disputes to arbitration should be upheld by the courts and awards enforced, regardless of the jurisdiction in which the agreements were made. The growth in cross-border commerce has made this increasingly important.

Access to the courts remain open to the party seeking relief should the other party fail to honour the valid award of the arbitrator in respect of matters referred to him in accordance with that arbitration agreement. Thus a dissatisfied party has recourse to the courts if he or she so wishes.

Costs

The complex procedures involved in court litigation means heavy legal costs which may be unsustainable for private individuals and small companies. Therefor in simple cases, the lower cost of arbitration can be an attractive inducement to these parties to arbitrate.

However it appears the new arbitration bureaucracy has replaced the old judicial bureaucracy. The time and expense of paper and face-to-face meetings unnecessarily contributes to the costs in many cases. There is a big question mark as to whether the cost of arbitration is lower than the cost of going to trial for more complex cases. Where a tribunal is involved, arbitrators’ fees can be relatively expensive. Apart from the arbitrator’s fees there are other incidental costs such as hire charges for the venue. Therefor costs may no longer be a factor to be considered by the parties in their choice to go for arbitration

Expertise and Knowledge

An arbitrator may have or members of a tribunal may consist of those who have the necessary qualifications and technical expertise to hear a case. This point carries even more weight in the case of a tribunal where parties are allowed to name an arbitrator of their choice, preferably one who has intrinsic knowledge of the case at hand. In litigation a judge may not necessarily understand the complexities involved in a shipping case for example. Furthermore in courts below the appellate level, judges sit alone which may further exacerbate the situation where specialist knowledge is required. Parties may come out of the courtroom feeling they may not have had a fair trial because of this.

The importance of arbitration is evident in the maritime and construction sectors where it is common, if not standard practice for commercial contracts to contain express clauses referring any future disputes to arbitration.

Privacy and confidentiality

There is an implied right of privacy in the arbitration process keeping matters private between the parties involved. The advantage over litigation which is a wholly public affair is that firstly outsiders do not get access to any potentially sensitive information and secondly the parties to the arbitration do not run the risk of any damaging publicity arising out of reports of the proceedings.

However in a recent Court of Appeal decision in England (Emmott v Michael Wilson & Partners Limited [2008]), the court acknowledged that parties to arbitration in England may generally be allowed, and may even be required, to disclose details of the arbitration where:

a.) Parties to the arbitration expressly or impliedly consent;
b.) Disclosure is reasonably necessary to protect legitimate interests of an arbitrating party (including requirements of public reporting, fiduciary obligations, auditing requirements, disclosures to insurers and disclosure in court applications);
c) A court permits disclosure (by order or leave); or
d) The interests of justice require disclosure and (perhaps) where public interest requires disclosure. 2

Disadvantages of arbitration over litigation

Subject Matter Not Capable of Settlement

The subject matter of the dispute is not capable of settlement by arbitration under the law of the relevant state e.g. criminal matters or matters of public law an example of this would be intellectual property rights. In some disputes, parts of claims may be arbitrable and other parts not. For example, in a dispute over patent infringement, a determination of whether a patent has been infringed could be adjudicated upon by an arbitration tribunal, but the validity of a patent could not as patents are subject to a system of public registration. An arbitral panel would have no power to order the relevant body to rectify any patent registration based upon its determination

Additionally an arbitrator may not have the power to grant remedies that a court can. There is support for the view that a court will refuse to stay proceedings in support of arbitration if the arbitrator cannot award the remedy claimed. In the case of Hashim bin Majid v. Param Cumaraswamy, an application to stay court proceedings was refused on the grounds that one of the remedies claimed by the plaintiff was a dissolution of the partnership and the court was of the view that this was not an issue that could be decided by an arbitrator.3

Award Not Necessarily Based on Rules of Law

An arbitrator may make an award based upon broad principles of “justice” and “equity” and not necessarily on rules of law or evidence. There is also the danger of unknown bias and competency of the arbitrator unless the arbitration agreement set up the qualifications or the organization that administers the arbitration, has pre-qualified the arbitrator.

Lack of Precedents

Since arbitration decisions are not public there is a lack of access to precedents on previous arbitration decisions. Additionally unlike litigation, the stare decisis rule does not apply. These two factors contribute to less certainty by the parties on the outcome of arbitration.

Non Adherence to Court Rules and Rules of Evidence

When the rules are not strictly adhered to this may lead to the cases where certain evidence may be admitted (for example hearsay) which is strictly not allowed in litigation due to the unavailability of cross-examination to test the accuracy of the statement.

Conclusion

Choosing which course of action to pursuit differs from one case to another. Essentially the most important factors are that arbitration offers a self help route in settling disputes outside the court system where the parties are in greater control over the proceedings.

Generally arbitration is a more efficient, less procedural and cheaper route to solving disputes although this may not necessarily be the case as arbitral proceedings become more complex.

The advantages of arbitration are more evident in cases where expertise in a certain area are required. Parties who want to maintain a harmonious relationship and who wish to have their dispute out of the public eye would also prefer the arbitration route.

1J.Baldwin, ‘Litigants’ Experiences of Adjudication in the County Courts’, 18 Civil Justice Quarterly, January 1999, pp. 12-40 at 20.

2M.Sindler, ‘Litigation, dispute resolution and arbitration: Privacy matters’, Legal Week, July 2008.

3Hashim bin Majid v Param Cumaraswamy (1993) 2 Malayan Law Journal 20.

Vocabulary Coach II

2009-08-17T05:27:00.000-07:00

14. craven - cowardly

The craven act of assaulting his lover by making anonymous threatening phone calls landed him in prison.

15. churlish - rude in a mean spirited, surly way

Her churlish behaviour got her in trouble with the school principal.

16. surly - bad tempered and unfriendly

17. disquieting - causing anxiety/uneasiness

18. consternation - feelings of anxiety or dismay, typically at something unexpected

19. jejune - naive, simplistic

20. oblate - a person dedicated to a religious life, but typically having not taken full monastic vows

Resulting Trusts and Constructive Trusts

2009-05-22T23:27:00.000-07:00

Like a constructive trust, a resulting trust arises by operation of law, although unlike a constructive trust, it gives effect to intention - Justin Santiago

Both constructive and resulting trusts differentiate themselves from express trust which arises because a right-holder has manifested an intention that a trust come into existence. In the case of constructive and resulting trusts the intentions are not expressly stated.

This statement in this question is derived from Lord Browne-Wilkinson's judgement in Westdeustsche Landesbank Girozentrale v Islington LBC (1996) where his view was that all resulting trusts arise because of a presumption that the transferor intended to create a trust for himself. This statement supports the argument that resulting trusts are the result of an intention not to create a trust. This thinking is also reflected in the Privy Council case of Air Jamaica v Charlton 1999, where Lord Millet said: “But [a resulting trust] arises whether or not the transferor intended to retain a beneficial interest - he almost always does not - since it responds to the absence of any intention on his part to pass a beneficial interest to the recipient.”

This argument was put forward in the recent theses of Birks-Chambers that the the key to the resulting trust was not the intention to create a trust, but the intention of the donor not to benefit the recipient.

The statement by Lord Browne-Wilkinson however shows a flawed approach at looking at intention by means of deducing a presumed intention. To presume an intention would be going against the fundamentals of trust. To create a trust the intention must be manifested or expressed and the the courts have placed increasing importance on the intention of the parties when determining whether there is a trust or not. The perceived artificiality of presumed intentions in the resulting trust doctrine has led courts to move away from it affirmed by the House of Lords in Stack v Dowden [2007] UKHL 17; [2007] A.C. 432.

The use of the term "resulting trust" in such a case is a misnomer in itself. The orthodox theory of resulting trusts contained in Vandervell v IRC states that where it was said that the beneficial interest must belong to or be held for somebody; so if there was an evidential gap in this respect it was not to belong to the donee or be held in trust by him for somebody, it must remain with the donor. However such a notion is false as an equitable interest arises only at the point where the trust arises. It must be questioned whether there is such a thing as a beneficial interest that can be retained. Beneficial interests are created in the hands of the beneficiary who holds the trustee to account for his exercise of those rights : DKLR Holding Co (No 2) Ltd v Commissioner of Stamp Duties. There is therefore no retention of anything.

The argument of Birks and Chambers, that the fact “presumed” in such circumstances is that the transferor did not intend to benefit the transferee, was shown to be based on a number of misunderstandings. First, gratuitous transfers outside the relationships of advancement are not “apparent gifts”, only ambiguous transfers. Secondly, suspicions are not the same things as presumptions, and in any case, equity is not “suspicious” of gifts. Thirdly, it is not possible for equity to “presume” that “apparent” gifts are not gifts, for “not-gift” is at best a legal conclusion from proved facts, not a fact in itself. Fourthly, a “presumption” of “not-gift” cannot be a “presumption” of “non-beneficial transfer” for the law does not recognise a notion of non-beneficial ransfer distinct from transfers on declared trusts or as security. And fifthly, no satisfactory explanation was given as to why, assuming there is such a thing as a “non-beneficial transfer”, the law should respond to its “proof” by the raising of a trust for the transferor. For these reasons, the argument that there should, by a logical extension of the traditional resulting trusts, be resulting trusts in the generality of cases of unjust enrichment is unsustainable.

Constructive trusts on the other hand might be regarded as an approach based on outcomes and result rather than principle or sound theory, as indicated by the statement of Sir Peter Millett (in (1995) Trust Law International, 35) that ‘... the language of constructive trust has become such a fertile source of confusion that it would be better if it were abandoned’. While not all reaction has been so extreme, much academic and judicial commentary has advocated restraint in the employment of the constructive trusts as a panacea for lack of a clear intention to establish a trust and the need for certainty.

Constructive trusts arise by operation of law and is imposed by the court as a result of the conduct of the trustee and therefore arises quite independently of the intention of any of the parties. The types of constructive trust :-

a. Constructive trusts arising on a specifically enforeceable contract for the sale of a title to land or known as Vendor – Purchaser Constructive Trust by William Swadling

The moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold and the beneficial ownership passes to the purchaser. There must be a valid contract of sale and and the contract must be one of which a court of equity will grant specific performance.

b. Constructive trusts arising when equity perfects an imperfect gift – donor done everything within his power to make the gift of perfect.

Mac Rules

2009-05-09T20:26:00.000-07:00

Right Click - Hold down the Control key and Click

Empty Trash - Go to Finder hold down the Option key and select Empty Trash

Force Quit - Command-Option-Q-Esc

Select Files - Shift Click

Deselect Files - Command Click

Make Font Bigger/Smaller Command +/-

Article 226

2009-05-07T21:47:00.000-07:00

Discuss the effectiveness of Article 226 procedure in ensuring compliance of Community law on the part of Member States. - Justin Santiago

Article 226 enables the Commission to take action against Member States which the Commission believes to be in breach of Community law and to ensure that Member States comply with their Community law obligations and procedures. Article 226 provides that if the Commission considers that a Member State has failed to fulfill an obligation under the Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations.This will result in a Declaration by the court to that effect. Article 228 was introduced to add a financial penalty to ensure Member States complied with Article 226 judgements. Art 228 is a separate action to impose fines to have a further deterrent effect depending on the seriousness of the breach and duration of the breach.

The advantages of proceedings under Article 226 are that the ECJ will pronounce directly on the compatibility of a Member State’s conduct with Community law compared to a preliminary reference from a national court under Article 234 where the ECJ will only give a ruling on the interpretation of Community law leaving it for the national court to spell out the implications of that ruling in the particular case.

The Commission initiates Article 226 proceedings either in response to a complaint from someone in a Member State or on its own initiative. Complaints are brought on the basis of information gained from diverse sources – through the press, from European Parliament questions or petitions or increasingly through the modern technological sources such as databases indicating when Member States have failed to notify their implementation of a directive. In the last 10 to 15 years complaints from citizens constitute a significant source for the detection of infringements and has suggested that this contributes towards a creating a more participatory Community in which citizens can play a role in law enforcement. However the individual has no say in determining whether or not the Commission actually initiates proceedings against a Member State : Star Fruit v Commission – Commission was not bound to take action but had a discretion also Commission had a right but not a duty to initiate proceedings before the ECJ following non-compliance with the reasoned opinion.

The most common reason for an Art 226 action is the non implementation, faulty implementation or non-application of secondary legislation. Very often it is the non-implementation of a directive within the allotted time limit. Directives need to be implemented by a certain date. The State is liable whichever of its organs is responsible for the breach and regardless of the internal division of powers between constitutional authorities and liable for the conduct of public agencies even if they are constitutionally independent : Commission v Ireland (Buy Irish).

The Commission often refers to the Member State’s obligation of sincere co-operation under Art 10 EC to underpin an action under Art 226. The Commission has absolute discretion on whether to start the Art 226 EC procedure and as to whether to take a case to the ECJ : Commission v Belgium. However the decision not to make a reasoned opinion and the decision not to submit a case to the ECJ have been held to be not reviewable under Art 230 EC as they are not acts that have legal effects : Alfons Lutticke. Additionally the discretion of the Commission to bring proceedings under Article 226 is excessively arbitrary.

The Art 226 procedure is intended to reach a negotiated settlement.Its informal administrative stage without recourse to a court enables many breaches to be resolved by friendly negotiations. This stage ends with the Commission issuing a reasoned opinion which forms the bases of the judicial stage of the proceedings before the ECJ. However this can be a long process and although an application for an interim measure under Article 234 can be made it must be established :-

1. There is a matter of urgency
2. There are factual and legal grounds to raise a prima facie justification for the interim measure

The effectiveness of an Art 226 action is diminished by the length of time the process takes and the lack of a serious penalty. The only result of a finding by the ECJ under Art 226 is that the Member State is in breach is a declaration to that effect. The Member State can continue to avoid complying with Community law obligations. Although documents related to the infringement proceedings is available a major source of frustration is difficulty in obtaining access to documents related to infringement proceedings.

The Commission does not have enough resources to bring enforcement proceedings against member states under Article 226. By introducing the concept of direct effect of EC law as well as indirect effect or in action for damages on the basis of the state liability doctrine, the ECJ enabled individuals and companies throughout the EU to become enforcers of Community law in the Member States without the need for Commission involvement.

There are also limited defences :-

1. Reciprocity

Argument of reciprocity was not applicable in the context of Community law as it was a new legal order which was not limited to creating reciprocal obligations as under international law.

2. Other Member States in breach

Grounds have been pleaded numerous time by Member States without success C266/03 – Commission v Luxembourg

3. Force majeur

Difficulties in parliamentary procedures or problems with the separation of powers within their systems to explain delay in compliance with EC law – rejected by the ECJ. However could be pleased where a bomb attack presented insurmountable difficulties rendering compliance with the Treaty impossible : Case 33/69 Commission v Italy (Re Transport Statistics) – data processing centre had been bombed however ECJ held that “time will erode the validity of the excuse.”

4. Internal difficulties

Internal difficulties not the Commission’s concern : C128/78 Commission v UK (tachographs)

5. Non-applicability of the offending law

C167/73 Commission v France (French Merchant Seamen) – rule in French code maritime was not enforced in practice against EU nationals but was not accepted because it gave rise to uncertainty about legal rights.

6. Community measure is illegal

C226/87 Commission v Greece – defence rejected because the appropriate remedy within the system of remedies set up by the Treaty was an action for judicial review under Art 230 EC.

7. Adequate implementation of the relevant community law by administrative measures

C29/84 Commission v Germany (Re Nursing Directives) – administrative measures widely publicized and not easily subject to alteration

8. Protection of fundamental human rights

Case 112/00 Schmidberger v Austria – freedom of expression and freedom of assemble were fundamental human rights guaranteed by the ECHR which are to be protected by the EC according to the TEU and hence the action by the claimant whose business of transporting goods was hampered by a demonstration failed.

Breach of Contract and Damages

2009-05-05T08:23:00.000-07:00

What is a Breach of Contract

A failure to perform a contract in accordance with the terms of the contract is a breach of contract, which will entitle the other party to the contract to an appropriate remedy.

A breach of contract is one of the four principal ways in which a contract can be discharged the others being discharge by performance, by agreement and by operation of law.

Consequences of Breach of Contract

There are three principal consequences of a breach of contract :-

1. The innocent part is entitled to recover damages in respect of the loss which he/she has suffered as a result of the breach
2. The party in breach may be unable to sue to enforce the innocent party's obligation under the contract
3. The breach may entitle the innocent party to terminate further performance of the contract

Every breach of a valid and enforceable contract gives to the innocent party a right to recover damages in respect of the loss suffered as a result of the breach. An action for damages lies whether the term which is broken is a condition, a warranty or an innonimate term.

Therefor the first step is in determining whether it was a term. The courts have adopted an an objective approach and several criteria have been adopted according to Heilbut, Symons & Co v Buckleton :-
verificiation, importance, special knowledge and time statement was made.

Verification

A statement is unlikely to be a term of the contract if the maker of the statement asks the other party to verify its truth : Ecay v Godfrey.

Importance

The more important the matter, the greater the likelihood that the parties intended it to be a term.

Special Knowledge

If the person making the statement has some special knowledge or skill compared to the other party, the statement may be held to be a term : Oscar Chess Ltd v Williams.

Time Statement Was Made

If a statement was made near or at a time the contract was made, it is more likely to be a term : Routledge v McKay.

The next step would be to determine whether the term was a condition, warranty or inonimate term.

A term classified as a condition would enable the injured party to either terminate the performance of the contract and claim for damages or perform the contract despite the breach and recover damages instead : Poussard v Spiers. The exercise of the right to terminate the performance of the contract discharges the primary obligations of both parties for the future and imposes on the party in breach, by way of substitution, an anticipatory secondary obligation to pay damages to the innocent party.

A breach of warranty will only give the injured party the right to claim damages, the performance of the contract cannot be terminated : Bettini v Gye. This is in actual fact the secondary obligation to pay damages a s a result of the breach created.

A breach of an inonimate term could result in one of two things depending on the consequences of a breach. If a breach of the term results in severe loss and damage, the injured party will be entitled to terminate the performance of the contract and parties will treat themselves as being discharged from the contract (prospective only). If the breach involves minor loss, the injured party’s remedies will be restricted to damages.

The aim of an award for damages is to compensate the claimant for the loss which he has suffered as a result of the defendant's breach of contract.

A claimant could claim compensation on a number of grounds which will be determined by the amount of damages which a claimant can recover by way of compensation:-

1. Expectation interest - to put the claimant in the position which he/she would have been in had the contract been performed according to the terms.
2. Reliance interest - to put the claimant in the position he/she would have been in had he/she not entered into the contract.
3. Restitution interest - restore the benefit to the claimant which he/she had conferred upon the seller however the claimaint must establish that the defendant was enriched, that the enrichment was at the claimant's expense and that it was unjust that the defendant retain the benefit without recompensing the claimant.

The courts have come up with a number of doctrines that need to be fulfilled in order for the claimant to claim by way of expectation interest :-

Mitigation

A claimant is under a duty to take all reasonable steps to mitigate his loss ad the claimant must not unreasonable incur expense subsequent to the breach of contract.

Remoteness

A claimant's expectation interest will not be fully protected where some of the loss which he has suffered is too remote a consequence of the defendant's breach of contract - losses that occur naturally or as a result of the usual course of things or were within the reasonable contemplation of both parties ad the time the contract was made.

Causation

A claimant can only recover damages in respect of the losses if there is a casual link between the loss and defendant's breach of contract.

Quantifying the Damage

It was established in Johnson v Agnew that damages are to be assessed as at the date of breach. But, where the claimant is unaware of the breach, damages will generally be assessed as at the date of on which the claimant, could with reasonable diligence, have discovered the breach.

Damages are generally assessed by reference to the market value of the promised contractual performance; that it to say, the claimant's loss is objetviely assessed. It has however also been recognised in Ruxley Electronics and Construction Ltd v Forsyth that the defendant was entitled to loss of amenity damages and the concept of 'consumer surplus' - claimant's subjective valuation of the contractual performance, which may be considered more than the market value - be considered.

Bill of Rights

2009-05-04T06:14:00.000-07:00

The constitutional implications of a British bill of rights. - Justin Santiago

A bill of rights would be likened to a written constitution outlining the positive rights of individuals and private citizens. It details the rights people have with regards to treatment from the State and remedies/protection available. A bill of rights would be likened to a form of law superior to other laws because it originates in an authority higher than the legislature which makes ordinary law and which can only be changed by special procedures. An example of this is the Constitution of the United States which requires not only the approval of Congress but also the the co-operation of other outside bodies (three-fourths of the States need to be in agreement – i.e. 38 of the 50 States have to be in favour of the amendment).

A bill of rights would have several constitutional implications :-

In the United Kingdom, where Parliament is supreme and may create any law that it pleases (by a simple majority vote in
Parliament), the bill of rights could always be amended or repealed by legislature in exactly the same way as any other ordinary Act of Parliament. A bill of rights would go against the doctrine of parliamentary sovereignty and would bind the UK in a way that it may not want.

A bill of rights may not be as flexible as the current situation with its extensive use of conventions which can change over time for example the convention that a Prime Minister has to be chosen from the party with a majority in the House of Commons has come about with the increasing importance of electoral representation in the highest seat in government. It allows for flexibility so that laws and rights move with the times and human rights can become more protected with time. The concept of entrenchment does not exist so these laws in turn do not bind future parliaments thus allowing even more flexibility. There has been a move towards subjecting political processes and decisions to formal hard law regulation that is enforceable by the courts – judicialization – and giving some level of rigidity to positive rights.

A bill of rights would also necessitate a Supreme Court to strike down any law that is in conflict with the Constitution. This would place the doctrine of separation of powers on a firmer footing in the UK. The Executive too would not be able to impinge on the independence of the judiciary. The view propounded by Lord Woolf was that “There was a growing encroachment by the government on judicial independence, warning that judges may need a written constitution to protect themselves from further political interference. This is to ensure that the judiciary can uphold the Rule of Law, prevent government from abusing its powers and to be independent from the government.”

Legislation in the EU and the role of the Institutions

2009-05-03T18:17:00.000-07:00

In the European Community, the power to approve new legislation is distributed between the Commission, the Council and the European Parliament. Does this accord with the concept of separation of powers? Discuss.

There is no single body identified as the “legislature” for the Community as a whole. There is also no one single legislative procedure and is dependent on what is specified under any particular Treaty Article.

There are several different procedures :-

1. The Commission acting alone – under Article 86(3) which concerns the role of the State in relations to public undertakings the Commission has the power to promulgate directives or decisions.

2. The Council and Commission acting alone – can take action without the intervention of the Parliament. The Council will act on a proposal from the Commission and take the decision in accordance with the voting requirement in the relevant Treaty article. Used in relation to aspects of free movement of workers and of capital, economic policy and common commercial policy

3. Council and Commission in consultation with Parliament - under the Treaty of Rome legislative power was concentrated in the Commision and the Council. The Commission would propose a measure and the Council would vote upon it. Parliament's only role was to be consulted before the proposal could be legislated in what is known as the consultation procedure. The Council did not have to incorporate the Parliament’s opinion or give reasons for rejecting it. The role of Parliament was strengthened by the ECJ which ruled that the Parliament must be consulted when so required by the Treaty. Failure to observe this essential procedural requirement is a ground for annulment under Article 230 EC : Roquette Freres v Council.

4. Council, Commission in cooperation with Parliament - the Single European Act (SEA) 1986 introduced the cooperation procedure under Article 252 EC increased Parliament’s role which reflected Parliament’s enhanced status after the initiation of direct elections in 1979. 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 combination of the Parliament and one Member State acting together could defeat a proposal for legislation

5. Council, Commission in codecision with Parliament - further powers were given to Parliament on the basis of its directly elected nature. Parliament has increasingly be seen as providing a measure of democratic accountability to the EU. The codecisionmethod of legislation has become the method for making much important Community legislation except agriculture, fisheries, taxation, trade policies, competition and EMU.

In the codecision procedure the Council and Parliament must both agree on the wording of the legislation. After the first reading of the legislation by both of the bodies, the Parliament can propose amendments. The Council then adopts a common position accepting, rejecting or making further amendments to the bill. If Parliament does not accept the common position, then the Commission can either withdraw the legislation or a Conciliation Committee is convened between the Parliament and Council to try to adopt a joint text that they both agree on. If this is successful, the law is passed, if not then it is rejected.

6. Council in comitology with Commission and Parliament - once legislation has been passed into law, it needs to be implemented by the Council. The Council through a parent regulation would authorize the Commission to enact more specific regulations within a particular area. The Council has passed a lot of responsibility for this phase of the legislative process to the Commission but it is not carte blanche and subject to institutional constraints - a series of committees formed of national experts that work with the Commission during the implementation process and who can refer measures that they disagree with back to the Council for review.

This procedure is known as comitology laid down by the SEA and modified under Art 202 and has been highly criticised by the European Parliament because of its non-involvement and undermines the gains that Parliament has made through codecision. The comitology committees’ work is also not transparent and there are complaints that comitology gives the Council and national Governments too much control over the Commission, which interferes with the relationship between these different institutions.

Member State Liability

2009-05-02T22:26:00.000-07:00

The signficance of Francovich and the provisions of Article 226 - Justin Santiago

The Francovich judgement established the principle of state liability to pay compensation for failure to transpose Community obligations into national law as outlined by Article 10. Francovich signaled the beginning of member state liability where member states can be held liable for non-implementation of a directive. This decision has paved the way for individuals to outflank the no horizontal direct effect ruling and to sue the State in damages where the state has failed to implement a directive. Three conditions were required to be fulfilled :-

1. Objective sought by the directive must include the creation of individual rights
2. The content of the rights must be ascertainable from the provision of the directive
3. There must be a causal link between breach of duty on the part of the State and the losses incurred by individuals

De Burca has additionally suggested that the case for direct enforcement against the state appears to be based on a concept of estoppel thereby the state may not rely upon its own failure to implement a directive properly.

However it has also been argued that the State should not be held liable as the State did no wrong to the claimants and the decision has blurred the distinction between private law rights and public law rights.

The correct course of action should have been by way of Article 226 which allows the Commission to take action against Member States which the Commission believes to be in breach of Community law and to ensure that Member States comply with their Community law obligations and procedure which includes implementing a directive. If the Commission considers that a Member State has failed to fulfill an obligation under the Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations.This will result in a Declaration by the court to that effect. This stage ends with the Commission issuing a reasoned opinion which forms the bases of the judicial stage of the proceedings before the ECJ. Art 228 was introduced by Treaty of the European Union in order to add a financial penalty to ensure Member States complied with Art 226 judgements. Art 228 is a separate action to impose fines to have a further deterrent effect depending on the seriousness of the breach and duration of the breach.

However Francovich was deemed necessary in light of the fact an action under Art 226 can be a long process. There are also limits to the effectiveness of Article 226 in ensuring compliance of Community law on the part of Member States :-

1 .The Commission has absolute discretion on whether to start the Art 226 EC procedure and as to whether to take a case to the ECJ : Commission v Belgium. The decision not to make a reasoned opinion and the decision not to submit a case to the ECJ have been held to be not reviewable under Art 230 EC as they are not acts that have legal effects : Alfons Lutticke. The discretion of the Commission to bring proceedings under Article 226 is excessively arbitrary.

2. The process is ineffective. The process is delicate, secret and often protracted - the effectiveness of an Art 226 action is diminished by the length of time the process takes and the lack of a serious penalty.

3. There is no genuine sanction against a member state which refuses to abide by the court’s ruling. The only result of a finding by the ECJ under Art 226 is that the Member State is in breach is a declaration to that effect. The Member State can continue to avoid complying with Community law obligations. The individual has no say in determining whether or not the Commission actually initiates proceedings against a Member State : Star Fruit v Commission – Commission was not bound to take action but had a discretion also Commission had a right but not a duty to initiate proceedings before the ECJ following non-compliance with the reasoned opinion. Although documents related to the infringement proceedings is available a major source of frustration is difficulty in obtaining access to documents related to infringement proceedings.

4. The Commission does not have enough resources to bring enforcement proceedings against member states under Article 226. By introducing the concept of direct effect of EC law as well as indirect effect or in action for damages on the basis of the state liability doctrine, the ECJ enabled individuals and companies throughout the EU to become enforcers of Community law in the Member States without the need for Commission involvement. An Art 226 declaration that a member state in breach will facilitate a state liability action by an individual.

There are also limited defences :-

1. Reciprocity

Argument of reciprocity was not applicable in the context of Community law as it was a new legal order which was not limited to creating reciprocal obligations as under international law.

2. Other Member States in breach

Grounds have been pleaded numerous time by Member States without success C266/03 Commission v Luxembourg

3. Force majeur

Difficulties in parliamentary procedures or problems with the separation of powers within their systems to explain delay in compliance with EC law – rejected by the ECJ. However could be pleased where a bomb attack presented insurmountable difficulties rendering compliance with the Treaty impossible : Case 33/69 Commission v Italy (Re Transport Statistics) – data processing centre had been bombed however ECJ held that “time will erode the validity of the excuse.”

4. Internal difficulties

Internal difficulties not the Commission’s concern : C128/78 Commission v UK (tachographs)

5. Non-applicability of the offending law

C167/73 Commission v France (French Merchant Seamen) – rule in French code maritime was not enforced in practice against EU nationals but was not accepted because it gave rise to uncertainty about legal rights.

6. Community measure is illegal

C226/87 Commission v Greece – defence rejected because the appropriate remedy within the system of remedies set up by the Treaty was an action for judicial review under Art 230 EC.

7. Adequate implementation of the relevant community law by administrative measures

C29/84 Commission v Germany (Re Nursing Directives) – administrative measures widely publicized and not easily subject to alteration

8. Protection of fundamental human rights

Case 112/00 Schmidberger v Austria – freedom of expression and freedom of assemble were fundamental human rights guaranteed by the ECHR which are to be protected by the EC according to the TEU and hence the action by the claimant whose business of transporting goods was hampered by a demonstration failed.

Advantages of proceedings under Article 226 are that the ECJ will pronounce directly on the compatibility of a Member State’s conduct with Community law compared to a preliminary reference from a national court under Article 234 where the ECJ will only give a ruling on the interpretation of Community law leaving it for the national court to spell out the implications of that ruling in the particular case.

Direct action

2009-05-02T21:07:00.001-07:00

Direct action provides an inadequate remedy against the protection of the individual. - Justin Santiago

Direct action comes under the broad area of judicial review of Community legislation. Specifically it means the ability to challenge the legality of a particular legislation directly to the European Court of Justice. The relevant law is Article 230 which states that the ECJ has the power to review the legality of acts intended to produce legal affects vis-à-vis third parties.

There are several constraints to Article 230. The reviewable acts must have legal effect for it to be subject to judicial review. Although the ERTA case held that the meaning of 'acts' was not restricted to the secondary legislation of the Community under Art 249 - Regulations, Directives and Decisions - but could include any act which had legal effects, Recommendations and Opinions as well as statements of objections raised by the Commission : Case 60/81 IBM.

Additionally for the action to succeed, the petitioner must show three things. First, the petitioner must have standing to bring the action. Second, the action must be against some institution over which the Court has jurisdiction. Third, the petitioner must show that the provision falls within one of the defined grounds for annullment. In addition, the action must be brought inside the strict time limit of two months.

Individuals come under the category of "non privileged applicants" distinct from privileged applicants such as Member States, the Council and the Commission. Under Article 230 as “non privileged applicants”, individuals can challenge an act where :-

1. the decision is addressed to the applicant
2. the decision is in the form of a Regulation
3. the decision is addressed to another person

In situation 1 where the decision is directly addressed to the applicant there is usually no problem. In situation 2 and 3 the applicant must show that the contested measure is of direct and individual concern to him or her.

Direct concern - it is necessary to show that there has been no exercise of discretion on the part of national authorities : Toepfer cases

Individual concern – Plaumann & Co v Commission – certain attributes which are peculiar and the number of persons identified are fixed. Class of people is closed on the date of adoption, identity of its members are unalterably fixed and therefore ascertainable : Piraiki- Patraiki.

However there have been criticisms which have led to AG Jacobs' opinion in UPA v Council which proposed a new test for individual concern - an applicant is individually concerned by a measure where by reason of his particular circumstances, the measure has, or is liable to have, a substantially adverse effect on his interests

The CFI suggested a new test in Jego-Quere et Cie SA v Commission a person is individually concerned if the measure affects his legal position in a manner which is both definite and immediate, by restricting his rights or be imposing obligations on him.

Four Weddings and a Video - Copyright and the Right to Privacy

2009-04-27T01:18:00.001-07:00

A couple interested in getting married approach a videographer and admire images and videos of three weddings under his portfolio. They enter into a cosy relationship until one day they discover their own wedding has been included in his portfolio. Can they ask him to remove it? - Justin Santiago

Copyright would usually belong to the author which in this case is the videographer. However there exists a right of privacy with regard to copyright works which enables the commissioner of the videos or photographs which in this case is the unhappy couple the right to prevent prevent the videographer from exhibiting the videos or photographs in public.

Copyright issues : Downloading and posting an article on illegal downloading

2009-04-26T02:52:00.000-07:00

I faced an interesting conundrum when I copied and pasted "No free lunch", an article about Singapore's nonchalant attitude towards downloading written by Grace Chng, on my blog. The article was published on asiaone.com, the online portal owned and managed by Singapore Press Holding, a media giant in Singapore. Did the post infringe copyright?

Let's go back to first principles. The article qualifies as a literary work (albeit in digital format) and is the property of Singapore Press Holdings (SPH) and will be protected by copyright. This gives SPH the right to prevent others from copying or reproducing the article. SPH could write to me and tell me to remove the work from the blog because it is a copy, republished without permission.

I could however fall back on air what is known as the fair dealing exceptions which allows me to use the work for non-commercial purposes which includes research and study as well as teaching which is what I hope to achieve through this blog.

- Justin Santiago

No free lunch?

by Grace Chng, asiaone.com, April 25, 2009

TWO days after the movie Slumdog Millionaire swept awards at the Oscar's in February, one smart teenager - her mother told me - had downloaded the movie.

She did not think twice that it might be intellectual theft because the movie had been posted via a YouTube-like site, waiting to be downloaded.

The teenager's attitude probably reflects those of other people here: Last week's report in The Straits Times on Online Piracy: Many Feel No Social Stigma, said that almost every Singaporean knows that downloading movies and music is illegal but it will not stop them from doing so.

The survey, commissioned by the Intellectual Property Office of Singapore (IPOS), found that while Singaporeans understood the need to respect intellectual property (IP), their actions left little to be desired.

In today's download-happy culture, getting things for free seems to be a given. That, and the bravado of being able to beat the system and get away with it, as well as the bragging rights to 'I saw it first' or 'I've played that game' long before a movie hits the screens or the game hits the shops, are the likely motivations of IP theft.

Worse, downloading sites like The Pirate Bay and RapidShare leave the doors wide open for people to load up on music and movies.

The Pirate Bay, for example, is the world's most high-profile file-sharing website, said the BBC last week. In February alone, 22 million simultaneous users registered with it.

To be sure, content owners are not sitting still. The site is being sued in Sweden by content owners there like Sony and Warner Brothers for IP theft.

The site's founders seem nonchalant about the suit, going by media reports. They consider themselves digital libertarians advancing the course of availing everything on the Internet for free.

Its founders were jailed by a Swedish court last week but the file-swapping site is still active.

Singapore's public education tack, to create greater awareness of the importance of IP rights protection, seems to be working. The IPOS survey results showed that awareness of IP theft was a little higher than two years' ago when the first survey was done. Authorities in other countries have wielded a tougher stick.

Last year in England, the British Phonographic Industry and telco cum media firm Virgin Media wrote to warn customers whose Internet link could have been used to download unlicensed content. In France, the government has threatened to cut off the Internet accounts of file-sharers.

But trying to completely outlaw piracy seemed like a losing battle, and music labels and movie houses decided to 'join' the rivals with legitimate online stores which allow customers to pick, choose and pay for what they want.

In Singapore, there is the more than 10-year-old Soundbuzz online music store. Vendors like Nokia and Sony Ericsson recently trotted out special handsets which are sold with bundled music from their respective online stores.

Admittedly, the content industry took too long to respond when file-sharing site Napster, which was started 10 years ago, began to chip away at its business model by letting people download content illegally. Mindsets about getting things for free over the Internet have been ingrained in peoples' minds.

Expect a long fight between the digital libertarians represented by the file-swappers and the content industry and authorities who say there is no such thing as a free lunch.

The twain shall ne'er meet.

chngkeg@sph.com.sg

This story was first published in The Straits Times Digital Life.

Unilateral Contracts

2009-04-23T17:31:00.000-07:00

The unilateral contract is of particular interest for two reasons : it raises a problem about the point in time in which there is acceptance and in determining how and when an offer can be revoked. - Justin Santiago

Unilateral contracts arise when the promisor makes an offer to the whole world. An offer is distinguished from a mere invitation to treat by a clear intention to be bound by an acceptance of the terms without further negotiations : Carlill v Carbolic Smoke Ball where precise details as to how to qualify for the reward were expressly stated.

The offeror is said to have waived the necessity for communication of acceptance. It is not necessary that each of the parties to expressly communicate their acceptance. Acceptance can be made by fully performing the act and would be deemed to be valid if all the precise details were followed which in the case of Carlill required the offeree to take the smokeball according to instructions to stop the flu. However there can be no acceptance of the offer without the knowledge of the offer. An ‘offeree’ cannot accept an offer that he is unaware of and there is no acceptance in ignorance of the offer : Gibbons v Proctor

In determining when an offer could be withdrawn, the general rule in contract law as expounded by Goff LJ in Daulia Ltd v Four Millbank Nominees Ltd, “there must be an implied obligation on the part of the offeror not to prevent the condition being satisfied which obligation arises as soon as the offeree starts to perform.” The performer would be deemed to embark on a journey of performance if he has taken steps to fulfill the conditions of the contract by spending time and money : Errington v Errington. However if the performance has yet to be compeleted the law will allow the promisor to to revoke the offer at any time before completion of the performance : Luxor (Eastbourne) vCooper. This is similiar to the law in bilateral contracts where the offeroror is free to revoke the offer anytime before acceptance : Routledge v Grant.

However the difficulty here lies in the fact that since the whole world has been informed of the offer, has the whole world been informed of the revocation of the offer? There are \no English cases on this issue but we can turn to the American case of Shuey v USA where it was said that the offeror can revoke the offer using the same method to reach the same audience. This law although not binding would be persuasive and its logic is that the same people who knew about the offer must know about the revocation lest they embark too far on their journey in performing the act that would constitute acceptance.

Copyright : Ebooks containing pictures of known actors/stars

2009-04-21T08:31:00.000-07:00

David Shen has a question about Ebooks. I wanted to write my own Ebook, and was wondering if it is breaching copyright protection if i copy and pasted pictures of well known actors/stars in the Ebook?

This area of law concerns copyright which is the right to prevent others from copying or reproducing an expression of an idea. In this case the expression of the idea is the two dimensional representation of the actors/stars in the form of a picture. in the case of the Ebook the image used will be in a digitised form of the original pictures and will be classified as reproductions of the copyrighted work which is entitled to the same level of protection as the original pictures.

The pictures would either be the property of the person who took it or the news agency who employed the person who took it or an image bank which has paid for the pictures and who is allowed to resell them for a fee.

One way for David Shen to overcome these obstacles is to take the pictures himself. Alternatively he may refer to the copyright owners as to which public license under the Creative Commons scheme is attached to the pictures. If the owners have opted for this scheme they may issue four varying levels of permission to parties interested to use the pictures. However it is unlikely the owners have opted for this scheme in this particular case due to the fact the actors/stars are well known and there is no benefit to the owners to allow their pictures to be used freely and for the fact that David is probably going to use it for commercial purposes. The scheme is more applicable for reproductions of copyrighted works that are not well known and used for academic or information purposes.

In conclusion David would probably have to pay for the use of the pictures. He can of course go ahead and take the risk of using the pictures in the hope of being lost in the crowd. However there is a chance the Ebook will become known enough to get the attention of the copyright owners and he can be sued for copyright infringement. On the other hand if the actors/stars are no longer popular, such additional publicity would be more than welcome and the copyright owners may just keep quiet about it.

- Justin Santiago

What is Pirate Bay guilty of?

2009-04-17T04:16:00.000-07:00

The four men who run The Pirate Bay, a file sharing website, have been found guilty of promoting copyright infringement by a Stockholm court. What exactly is their crime? - Justin Santiago

Interestingly the site was was still up as of today 17th April 2009 . I was able to search for Australia, the movie directed by Baz Luhrman, but was unable to copy the bit torrent into Limewire, a peer to peer network and start the downloading process, as I usually would have done. Could this be a sign that the good times of old when we could download movies for free are now over?

It appears that Sweden are taking the tough stand on facilitation of copyright infringement which in the UK is not a crime but which prosecutors interpret to mean 'distributing' infringing copies or 'communicating' copies to the public in the course of a business to apprehend criminals.

Enforcement of community law by the ECJ

2009-04-17T02:20:00.000-07:00

To what extent is the ECJ prepared to mandate the remedies that are available to victims of breaches of substantive EC law. - Justin Santiago

Enforcement of Community law rights by individuals or legal persons (companies) mainly takes place at the national level in the national court. Initially, under the principle of national procedural autonomy the ECJ contended that the national legal system determines the primary conditions under which rights granted by EC law are to be protected. The remedies obtained in respect of Community laws are those available under national law, there is no uniform set of Community law remedies with the exception of state liability. In Rewe v Hauptzollamt Kiel it was stated that “Community law …was not intended to create any new remedies in the national courts to ensure the observance of Community law other than those already laid down by national law.”

ECJ has changed its position on victims of breaches of EC law from refusing to rule on compensation or interest Rewe-Zentralfinanz (1976)), to ruling that compensation was payable (Von Colson (1984)) but not stipulating the amount, to Marshall v Southhampton and South West Area Health Authority No. II (1993) in which it was prepared to rule on amount and interest.

The ECJ's original standpoint was that it is for the national courts to decide what remedies would be available, by applying the Community's substantive law under their own procedures. It was not in the interests of the ECJ to be seen to undermine the authority of the national courts by defining remedies as well as interpreting the law.

For the first twenty years or so of the Communities, the issue of remedies was not particularly prominent. At that time, litigants in the ECJ were primarily member states and institutions of the Communities. Whether or not the ECJ would mandate a remedy became a more pressing question in the 1970s, with the emergence of the doctrine direct effect enunciated by the ECJ in cases such as Van Gend en Loos1963 and many others, makes it clear that an individual may rely on his rights under EU law in actions against the state in the national courts.

When it became apparent that Community law created rights and duties which could be invoked in domestic courts by private individuals, it was only a matter of time before those individuals began to expect particular remedies to be available. The ECJ has expanded its jurisdiction in this area to fulfill its duty under Art. 200 to see that “the law is observed”. Thus there has been a gradual and incremental increase in the ECJ's willingness to oversee judicial remedies away from an initial refusal to grant a particular remedy to claimants.

The ECJ laid down two principles in the case of Rewe Zentralfinanz and Comet BV v Productchap namely :-

1. The principle of equivalence - remedy for the EC law right should be no less favourable than those relating to similar domestic claims

2. The principle of practical possibility – the remedy should not be rendered impossible to practice or excessively difficult

Subject to these two requirements, the procedures and remedies for breach of Community law were primarily a matter for the Member States. States were not required to provide remedies which would not be available under national law. New national remedies did not therefor have to be created although existing national remedies must not render the exercise of the right impossible in practice.

Subsequently in later cases the ECJ insisted that the remedies provided by national law must be proportionate, adequate and should have a deterrent effect in order to be effective in guaranteeing real and effective protection.

With regard to proportionality Sagulo concerned fines imposed by France and Germany on workers from other states for not applying for the appropriate residence permits, in breach of EC legislation. The ECJ held that these fines were so excessive as to amount to a barrier to free movement workers. In Von Colson a worker was found by the German courts to be a victim of gender discrimination that was unlawful under EC law. The ECJ held that the remedy offered must be adequate and must also have a deterrent effect. A nominal or token remedy would not have that effect.

While no problems existed with the priciples of proportionality and adequacy the effectiveness requirement has provided the most tension between national procedural responsibility and autonomy and the requirement that national remedies must secure the effectiveness of Community rights.

Dekker involved a discriminatory case by a company who refused to hire a pregnant woman against Directive 26/207. It was held that Dutch law required proof of not only discrimination but unjustified discrimination. It was deemed not to be effective.

The effectiveness requirement was highlighted in Factortame I in which the ECJ drawing on its earlier Simmenthal ruling based on the principle of cooperation laid down in Article 5 of the EEC Treaty ruled that any provision of a national legal system which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to do everything necessary would be incompatible. The ECJ left it to the House of Lords to specify the conditions under which interim relief should be granted in a given case but made clear that a rule which prohibited absolutely the grant of interim relief would be unacceptable.

In subsequent cases, the ECJ used the principle of effectiveness not only to dictate the form of the remedy, but also to make detailed pronouncements on the amount of compensation payable. In Marshall v Southhampton and South West Area Health Authority No. II (1993) the ECJ was prepared to rule on amount and interest.

Here the ECJ was not merely mandating an effective compensation, it was involving itself in determination of whether a particular amount was effective or not and marks a high point of the ECJ’s interventionist approach to the amount of compensation awarded by national courts, a striking departure from earlier cases.

However note the case of R v Secretary Of State For Social Security Ex Parte Sutton, where the ECJ appears to confine the Marshall II decision almost to its particular facts and the case of Steenhorst-Neerings which was justified on the basis of satisfying the twin conditions of equivalence and practical possibility (one year time bar was within limits) denying the claimant an action for retrospective payment of several years of disability benefits during the period when the Directive on sex discrimination in social security had not been properly implemented into Dutch law although the facts of the case was similar to Emmot where the ECJ ruled that where an individual sought to rely on the provisions of an unimplemented directive, the time limit for bringing proceedings should not start to run until the Directive had been properly implemented otherwise it would be impossible to make the claim.

Over time the ECJ has developed a detailed balancing approach which requires the importance of the Community right to be weighed against the scoep and purpose of the national rule taking into account all the circumstances of the case. The ECJ generally acknowledges the legitimacy of diverse national rules and the primary role of the national court in assessing these.

The requirement of “effectiveness” additionally forced the member state to create an entirely new remedy despite the no new remedies rule in Rewe-Handelgesellschaft. In Francovitch the claimants had suffered financial losses when their employer became insolvent, which they would not have suffered had the Italian state implemented a directive intended to protect employees against this occurence.

In this case the ECJ recognized a specific liability in damages on the part of the state for breaches of Community law and held the Member State liable for those losses for non-implementation of the directive. In Francovitch, the ECJ stated three conditions that had to be satisfied for the state to be held liabile for losses following from non-implementation of a directive:-

- the directive had to create rights for individuals
- those rights had to be ascertainable from the text of the directive
- there had to be a causal link between the non-implementation and the claimant's loss

In fact, the decision is potentially wider than this, as it describes any breach of EC law by the state as creating a cause of action including implementing a directive improperly, although only non-implementation is discussed in detail.

The rationale behind this decision was that member states liability was inherent in the scheme of the EC Treaty and in the member states’ obligations under Article 10. In addition to ruling that an individual could take action against the state for non-implementation, the ECJ stipulated that the successful litigant should be awarded damages.

The principle was clarified and extend in the joined cases of Brasserie du Pecheur and Factortame III. In these two cases the ECJ located the principle of state liability in the context of the Treaty provisions on the Community’s liability under Article 288 – the Coummunity shall in accordance with the general principles common to the laws of the Member States make good any damage caused by its institutions or by its servants in the performance of their duties – intended to legitimize the development of the principle of state liability.

Drawing on international law principles and on its case law under Art 226, the ECJ ruled that the State is liable whichever of its organs is responsible for the breach and regardless of the internal division of powers between consititutional authorities. In Kobler the principle of state liability applies even to violations of EC law by national courts of last instance.

In neither Factortame III or Brasserie du Pecheur, decided at the same time, did the ECJ attempt to quantify the damages that would be awarded. It refered instead to its earlier decisions on remedies, indicating that the award must be equivalent to one that would be obtained if there were a similar breach of national law, and effective to ensure that EU law was observed. There was no objection, in principle, to member states' imposing limitations on damages, or rules about mitigation of losses, or time limits within which actions should be started. The member states’ argument is that there should be procedural autonomy of national legal systems and it ought to be for the national courts to determine the remedy.

ECJ and the national courts and the preliminary reference procedure under Art 234

2009-04-16T23:19:00.000-07:00

The relationship between the ECJ and the national courts as it was originally envisaged, as “bilateral and horizontal” but is increasingly becoming more “multilateral and vertical.” - Justin Santiago

The relationship between national courts and the ECJ was originally set out under Art 234 which allowed a preliminary reference by a national courts to the ECJ for an interpretation of a point of EC law and it was up to the national court to apply the interpretation to the facts of the particular case and make a decision. Before an application for an interim measure under Article 234 can be made but it must be established :-

1. There is a matter of urgency
2. There are factual and legal grounds to raise a prima facie justification
for the interim measure

Purpose of Art 234

1. To ensure the unity of interpretation
2. To ensure that community law is uniformly applied
3. To complement other actions against member states and community institutions – Art 230, member state liability, direct, indirect effect
4. To prevent a body of national not in accord with the rules of community law from coming into existence
5. What is most importance is the cooperation of the national courts and the willingness to make references

The relationship was horizontal in the sense that the ECJ and the national courts were separate but equal. It was for the national court to decide whether to refer a matter to the ECJ which the ECJ would then interpret. It was bilateral in the sense that the interpretation would be delivered to the particular national court that made the request.

However, the ECJ has become increasingly influential in the hierarchy of courts and there is a move to go beyond interpretation and to decide on actual cases and for national courts to follow precedents set by the ECJ.

The relationship has become more vertical and multilateral through the doctrine of direct effect where the body of law provided by the EC treaties and even extended to directives can have effect without the need for national legislation and the rulings of the ECJ are increasingly having either a de jure or de facto impact on all other national courts.

The ECJ has held that it was not always mandatory for a court of last appeal to refer : Da Costa en Schaake NV v Nederlandse Belastingadiministratie. Guidance on referal was provided in CILFIT, a national court need not refer if :-

- the interpretation of EC law is so clear that only one outcome is reasonable – similar to the concept of acte claire in French administrative law, by which the ECJ was no doubt influenced.
- a case with similar facts has already been decided by the ECJ
- the interpetation of EC law would have no relevance to the outcome of the case.

CILFIT is interesting in that it suggests that a national court need not refer if the issue of EC law has similar facts to those of issue on which the ECJ has previously ruled. It does not require that the facts be identical. This suggests that the ECJ expects its decisions to have precedential value which is binding on national courts. If this view is correct, then it represents a significant departure from the relationship between the ECJ and national courts as it was originally envisaged, as “bilateral and horizontal” but is increasingly becoming more “multilateral and vertical”. If the decisions of the ECJ have the status of binding precedent, then this makes the ECJ more like an appellate court that an advisory body, for better or worse.

ECJ and remedies

2009-04-15T01:39:00.000-07:00

To what extent is the ECJ is prepared to mandate the remedies that are available to victims of breaches of substantive EC law. - Justin Santiago

ECJ has changed its position e to victims of breaches of EC law from refusing to rule on whether compensation or interest was payable : Rewe-Zentralfinanz , to ruling that compensation was payable: Von Colson but not stipulating the amount, to Marshall v Southhampton and South West Area Health Authority No. IIin which it was prepared to rule on amount and interest.

The ECJ's original standpoint was that it is for the national courts to decide what remedies would be available, by applying the Communities' substantive law under their own procedures under the principle of national procedural autonomy. It was not in the interests of the ECJ to be seen to undermine the authority of the national courts by defining remedies as well as interpreting the law. The remedies obtained in respect of Community laws are those available under national law, there is no uniform set of Community law remedies with the exception of state liability. In Rewe v Hauptzollamt Kiel it was stated that “Community law …was not intended to create any new remedies in the national courts to ensure the observance of Community law other than those already laid down by national law.”

For the first twenty years or so of what is now the EU, the issue of remedies was not particularly prominent. At that time, litigants in the ECJ were primarily member states and institutions of the Communities. Whether or not the ECJ would mandate a remedy became a more pressing question in the 1970s, with the emergence of the doctrine direct effect enunciated by the ECJ in cases such as Van Gend EnLoos1963 and many others, makes it clear that an individual may rely on his rights under EU law in actions against the state in the national courts.

When it became apparent that EU law created rights and duties which could be invoked in domestic courts by private individuals, it was only a matter of time before those individuals began to expect particular remedies to be available.

The ECJ has expanded its jurisdiction in this area to fulfill its duty under Art. 200 to see that “the law is observed”. Thus there has thus been a gradual and incremental increase in the ECJ's willingness to oversee judicial remedies away from an initial refusal to grant a particular remedy to claimants.

The ECJ laid down two principles in the case of Rewe Zentralfinanz and Comet BV c Productchap namely :-

1. The principle of equivalence - remedy for the EC law right should be no less favourable than those relating to similar domestic claims

2. The principle of practical possibility – the remedy should not be rendered impossible to practice or excessively difficult

Subject to these two requirements, the procedures and remedies for breach of Community law were primarily a matter for the Member States. States were not required to provide remedies which would not be available under national law. New national remedies did not therefor have to be created although existing national remedies must not render the exercise of the right impossible in practice.

Subsequently in later cases the ECJ insisted that the remedies provided by national law must be proportionate, adequate and should have a deterrent effect in order to be effective in guaranteeing real and effective protection.

With regard to proportionality Sagulo concerned fines imposed by France and Germany on workers from other states for not applying for the appropriate residence permits, in breach of EC legislation. The ECJ held that these fines were so excessive as to amount to a barrier to free movement workers. In Von Colson a worker was found by the German courts to be a victim of gender discrimination that was unlawful under EC law. The ECJ held that the remedy offered must be adequate and must also have a deterrent effect. A nominal or token remedy would not have that effect.

While no problems existed with the priciples of proportionality and adequacy, the effectiveness requirement has provided the most tension between national procedural responsibility and autonomy and the requirement that national remedies must secure the effectiveness of Community rights.

In Dekker which involved a discriminatory case by a company who refused to hire a pregnant woman against Directive 26/207. It was held that Dutch law which required proof of not only discrimination but unjustified discrimination could not be applied. It was deemed not to be effective.

The effectiveness requirement was highlighted in Factortame I in which the ECJ drawing on its earlier Simmenthal ruling based on the principle of cooperation laid down in Article 5 of the EEC Treaty ruled that any provision of a national legal system which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to do everything necessary would be incompatible. The ECJ left it to the House of Lords to specify the conditions under which interim relief should be granted in a given case but made clear that a rule which prohibited absolutely the grant of interim relief would be unacceptable.

In subsequent cases, the ECJ used the principle of effectiveness not only to dictate the form of the remedy, but also to make detailed pronouncements on the amount of compensation payable. In Marshall v Southhampton and South West Area Health Authority No. II (1993) the ECJ was prepared to rule on amount and interest.

Here the ECJ was not merely mandating an effective compensation, it was involving itself in determination of whether a particular amount was effective or not and marks a high point of the ECJ’s interventionist approach to the amount of compensation awarded by national courts, a striking departure from earlier cases.

However note the case of R v Secretary Of State For Social Security Ex Parte Sutton, where the ECJ appears to confine the Marshall II decision almost to its particular facts and the case of Steenhorst-Neerings which was justified on the basis of satisfying the twin conditions of equivalence and practical possibility (one year time bar was within limits) denying the claimant an action for retrospective payment of several years of disability benefits during the period when the Directive on sex discrimination in social security had not been properly implemented into Dutch law although the facts of the case was similar to Emmot where the ECJ ruled that where an individual sought to rely on the provisions of an unimplemented directive, the time limit for bringing proceedings should not start to run until the Directive had been properly implemented otherwise it would be impossible to make the claim.

Over time the ECJ has developed a detailed balancing approach which requires the importance of the Community right to be weighed against the scoep and purpose of the national rule taking into account all the circumstances of the case. The ECJ generally acknowledges the legitimacy of diverse national rules and the primary role of the national court in assessing these.

The requirement of “effectiveness” additionally forced the member state to create an entirely new remedy despite the no new remedies rule in Rewe-Handelgesellschaft.

In Francovitch the claimants had suffered financial losses when their employer became insolvent, which they would not have suffered had the Italian state implemented a directive intended to protect employees against this occurence. In this case the ECJ recognized a specific liability in damages on the part of the state for breaches of Community law and held the Member State liable for those losses for non-implementation of the directive. In Francovitch, the ECJ stated three conditions that had to be satisfied for the state to be held liabile for losses following from non-implementation of a directive:-

- the directive had to create rights for individuals
- those rights had to be ascertainable from the text of the directive
- there had to be a causal link between the non-implementation and the claimant's loss

In fact, the decision is potentially wider than this, as it describes any breach of EC law by the state as creating a cause of action including implementing a directive improperly, although only non-implementation is discussed in detail.

The rationale behind this decision was that member states liability was inherent in thescheme of the EC Treaty and in the member states’ obligations under Article 10. In addition to ruling that an individual could take action against the state for non-implementation, the ECJ stipulated that the successful litigant should be awarded damages.

The principle was clarified and extend in the joined cases of Brasserie du Pecheur and Factortame III. In these two cases the ECJ located the principle of state liability in the context of the Treaty provisions on the Community’s liability under Article 288 – the Coummunity shall in accordance with the general principles common to the laws of the Member States make good any damage caused by its institutions or by its servants in the performance of their duties – intended to legitimize the development of the principle of state liability.

Drawing on international law principles and on its case law under Art 226, the ECJ ruled that the State is liable whichever of its organs is responsible for the breach and regardless of the internal division of powers between consititutional authorities. In Kobler the principle of state liability applies even to violations of EC law by national courts of last instance.

In neither Factortame III nor Brasserie du Pecheur, decided at the same time, did the ECJ attempt to quantify the damages that would be awarded. It refered instead to its earlier decisions on remedies, indicating that the award must be equivalent to one that would be obtained if there were a similar breach of national law, and effective to ensure that EU law was observed. There was no objection, in principle, to member states' imposing limitations on damages, or rules about mitigation of losses, or time limits within which actions should be started. The member states’ argument is that there should be procedural autonomy of national legal systems and it ought to be for the national courts to determine the remedy.

General Principles of EU Law

2009-04-15T01:02:00.000-07:00

The general principles of EU Law that the ECJ has recognised and incorporated into the Community legal order are summarized as :-

- fundamental human rights
- proportionality – limit on Community powers
- legal certainty
- equality
- subsidiarity – limit on Community powers
- principles of procedural propriety
- equivalence
- practical possibility
- effectiveness

Fundamental human rights

The ECJ has changed its stance with regard to recognizing fundamental human rights and this has changed with the increase in emphasis on the protection of human rights and fundamental freedoms.

In early cases such as Stork v Higher the ECJ explicitly denied that human rights were part of EC law or that secondary legislation of the EC could be challenged with reference to such rights. In the case of Stauder v City of Ulm the courts took a more positive attitude and referred to the fundamental human rights enshrined in the general principles of Community law and protected by the court. In the case of International Handelsgesselshaft the ECJ ensured that the rights although based on national constitutions were part of the Community general principles. In the case of Nold the courts declared a further source of inspiration for fundamental rights which were international treaties such as the European Convention on Human Rights (ECHR).

However cases like Frontini v Ministero dell Finanze brought to light the reservations of the local constitutional courts in giving up protection of fundamental rights protected by the Italian constitution. In the UK where the ECHR was incorporated into UK law via the HRA it is not mandatory that an Act of Parliament needs to be compatible with ECHR rights. Section 19 of the HRA 1998 allows for a minister responsible for the passage of a Bill through Parliament to make a statement that the bill does not comply with ECHR rights. While allowing for greater scrutiny of that particular bill it still means that Parliament is free to enact legislation that may run counter to any of the articles of the ECHR such as the Anti-Terrorism Crime and Security Act 2001.

The ECJ will also often recognize the existence of a right but then balance it against the Community interest : Hauer v Land Rheinland-Pfalz – rights to property and trade – to plant vines and to trade in wine balanced against producing a balanced wine maket and to limit excess production of inferior wine from Germany. The ECJ also ruled that although it had no jurisdiction to examine the compatibility of national rules with the ECHR where national rules fall within the scope of Community law they may be reviewed by the ECJ to ensure their compatibility with the fundamental rights protected by Community law.

The ECJ will also not rule on the compatibility of national rules with the ECHR however where national rules wall within the scope of Community law they may be reviewed by the ECJ to ensure their compatibility with the fundamental rights protected by Community law. ERT v Dimotiki Etaira Pliroforissis – national rules fall under the combined provisions of Article 46 and 55 (then Art 56 and 66) – freedom of movement and claimants were relying on derogations granted b the Treaty and therefor ECJ had power to review.

The fundamental rights are now recognised in Art 6 Treaty on the European Unition - TEU and have been codified in the Charter of Fundamental Rights although this is not legally binding. It has been cited by Advocate Generals in their opinions but has not been relied on by the ECJ itself.

Proportionality

The third paragraph of Art 5 EC sets out the principle of proportionality which states that action by the Community should not go beyond what is necessary to achieve the objectives of the treaty.

R v Intervention Board ex p. Man Sugar Ltd – in this case Man had been late in applying for a export licence. The short delay of only four hours resulted in their losing all their bank securities in accordance with Community law. The ECJ concluded that the penalty imposed was disproportionate and too drastic

The Court has however set a low standard of scrutiny of measures in the light of the proportionality principle. It has held that the Community legislature must be allowed a broad discretion in an area such as the protection of public health which means that it must make complex political, economic and social choices. Consequently, the legality of a measure adopted to protect public health can be affected only if the measure is manifestly inappropriate having regard to the objective pursued by the competent institutions. As a consequence, it is only relatively seldom that measures are found by the Court to be disproportionate.

Subsequently in later cases the ECJ insisted that the remedies provided by national law must be proportionate, adequate and should have a deterrent effect in order to be effective in guaranteeing real and effective protection.

With regard to proportionality Sagulo concerned fines imposed by France and Germany on workers from other states for not applying for the appropriate residence permits, in breach of EC legislation. The ECJ held that these fines were so excessive as to amount to a barrier to free movement workers.

Legal Certainty

The principle which is a very wide one has been applied in more specific terms as :

- the principle of legitimate expectations
- the principle of non-retroactivity

The ECJ equates the protection of legitimate expectation with the provision of a fair process. There is limitation to the scope of this principle in that it may not be relied upon if the result is to fetter the Community’s freedom to act. The ECJ will need to undertake a balancing of interests in which the Community’s freedom of action may prevail : O’Dwyer and Others v Council.

Equality

The principle of equality means in its broadest sense that persons in similar situations are not to be treated differently unless difference in treatment is objectively justified. The EC Treaty expressly prohibits discrimination on the grounds of nationality : Art 12, on the grounds of sex with reference to pay : Art 141, between producers or consumers within the Community : Art 34(2). The Treaty of Amsterdam included a new Art 13 (Art 13 EC) which gives a legal base for the Community to take action to combat discrimination. Two Directives have been legislated on this legal base : Directive 2000/78 and Directive 2000/43.

Subsidiarity

The principle of subsidiarity was added to the European Community legal order by Treaty of the European Union and is contained in Art 5 EC and states that decisions should be taken at the lowest level possible as close to the individual as possible :-

Tests to be applied to see if the principle of subsidiarity is complied with

1. The sufficient attainment test Article 5(2) – Community shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the member states – if the member state cannot achieve the aim, it should be achieved by the Community (negative test)

2. The better attainment test – should onoy be preferred to member state action if this will bring demonstrable advantages (positive test)

ECJ has been reluctant to interfere with Community action – C-84/94 UK v Council – community action was necessary in order to achieve the health and safety objectives set in the directive

The idea of subsidiarity has been familiar for decades in the Community :-

1. The division of function between national and Community courts under the Article 234 preliminary reference procedure
2. The distinction between the Regulation and the Directive under Article 249
3. The scope of Article 28 – Torfaen v B&Q plc
4. The scope of Article 81 – Glaxo Smith Kline judgement
5. The enforcement of competition law envisaged by Regulation 1/2003

Equivalence and Practical Possibility

The ECJ laid down two principles in the cases of Rewe Zentralfinanz and Comet BV c Productchap namely :-

1. The principle of equivalence - remedy for the EC law right should be no less favourable than those relating to similar domestic claims

2. The principle of practical possibility – the remedy should not be rendered impossible to practice or excessively difficult

Subject to these two requirements, the procedures and remedies for breach of Community law were primarily a matter for the Member States. States were not required to provide remedies which would not be available under national law. New national remedies did not therefor have to be created although existing national remedies must not render the exercise of the right impossible in practice.

Effectiveness

While no problems existed with the priciples of proportionality and adequacy the effectiveness requirement has provided the most tension between national procedural responsibility and autonomy and the requirement that national remedies must secure the effectiveness of Community rights.

In Dekker which involved a discriminatory case by a company who refused to hire a pregnant woman against Directive 26/207. It was held that Dutch law which required proof of not only discrimination but unjustified discrimination could not be applied. It was deemed not to be effective.

The effectiveness requirement was highlighted in Factortame I in which the ECJ drawing on its earlier Simmenthal ruling based on the principle of cooperation laid down in Article 5 of the EEC Treaty ruled that any provision of a national legal system which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to do everything necessary would be incompatible. The ECJ left it to the House of Lords to specify the conditions under which interim relief should be granted in a given case but made clear that a rule which prohibited absolutely the grant of interim relief would be unacceptable.

In subsequent cases, the ECJ used the principle of effectiveness not only to dictate the form of the remedy, but also to make detailed pronouncements on the amount of compensation payable. In Marshall v Southhampton and South West Area Health Authority No. II (1993) the ECJ was prepared to rule on amount and interest. In Von Colson a worker was found by the German courts to be a victim of gender discrimination that was unlawful under EC law. The ECJ held that the remedy offered must be adequate and must also have a deterrent effect. A nominal or token remedy would not have that effect.

Here the ECJ was not merely mandating an effective compensation, it was involving itself in determination of whether a particular amount was effective or not and marks a high point of the ECJ’s interventionist approach to the amount of compensation awarded by national courts, a striking departure from earlier cases.

Is YouTube enabling theft?

2009-04-11T15:35:00.000-07:00

Tommy Peters has a question about the legality of downloading videos from YouTube. - Justin Santiago

I have a question about YouTube and copyright infringement. At what point does Satriani relinquish control of his work? His live performance at Anaheim 2006 is ‘downloadable’ from YouTube not only via Websatch, his YouTube page, but also through accounts of his fans.

Here's the explanation.

It is important to note a few points from this question which is related to Copyright Law.

There are two issues here firstly whether the act of downloading a video and subsequently uploading that video constitutes copyright infringement and secondly whether YouTube is assisting in copyright infringement.

We have to make a few assumptions.

Firstly assumption either Satriani is the owner of the copyright in the video or his record company is the owner of the copyright.

Secondly assumption YouTube acts as a broadcaster through which these videos are broadcast and is permitted to broadcast these videos the moment the copyright owners uploads the videos much. Alternatively You Tube may have a licensing deal with the copyright owners to upload the videos.

Copyright is defined as the right to prevent others from copying or reproducing your work. The relevent law in both these cases is the New Copyright Regulations which forms part of the Copyright, Designs and Patents Act 1988.

In the first issue the act of downloading itself makes a reproduction of the work so this act would violate copyright law. Needless to say the act of uploading the video on another site would also amount to copyright infringement.

In the second issue the act of facilitating copyright infringement could amount to aiding and abetting in violating copyright law. A quick fix on YouTube would prevent videos from being downloaded. However this has not been done.

While there is no offence facilitation of copyright infringement the possibility of downloading copies of the video could amount to 'distributing' infringing copies or 'communicating' copies to the public in the course of a business.

However we are also told that the posting on Websatch was done by either Satriani or his record company with full knowledge that the video would be watched and downloaded and possibly be itself put up as a downloadable video by his fans beyond what would be considered "fair use" such as criticism, comment, news reporting, teaching, scholarship, and research. It can be argued that Satriani has 'consented' to copyright infringement and allowed others to copy or reproduce his work.

However this argument does not hold water. Satriani or his record company have posted the video but have not consented to having their rights as owners and to have access to revenue from its sale and distribution being violated. Just because I publish a book does not mean it is an invitation for you to make photocopies of it.

In conclusion downloading is to be viewed synonymously with theft if the object of the download was to usurp the rights of the copyright owner. Artists like Satriani and his record company are forced to accept the fact that sites like YouTube are a means to reach an audience as wide as possible but at the same time allow for easy downloading, a feature that can be easily disabled by YouTube. YouTube too are hiding behind the cover of the exclusion of prosecution for facilitation of copyright infringement. In the US YouTube are able to seek protection from litigation by Section 512 of the Digital Millenium Copyright Act which contains "safe-harbor" provisions for online service providers. These safe harbor provisions shield online service providers, like ISPs, hosting providers, search engines, and website operators, from copyright infringement claims made against them based on the conduct of their customers or users. To take advantage of the safe-harbor provisions, online service providers need to implement "notice-and-takedown" procedures that call for expeditious removal of content upon receipt of a formally valid takedown notice from a copyright owner.

Employee's Rights in Their Own Work

2009-04-10T19:32:00.001-07:00

Do I own the copyright to the work that I have produced? - Justin Santiago

Sounds like a silly question. Of course I own it - I am the author, aren't I? However there is one important statutory exception under the Copyright and Related Rights Regulations 1996 where it is stated that if a literary, artistic, dramatic or musical work or a film is created by an employee in the course of his employment, that employee's employer will be the first owner of copyright in the work.

If I was an employee and wanted to claim the copyright to my work I would have to take note of the following based on Ultra Marketing (UK) LImited and Thomas Alexander Scott v Universal Components Ltd :-

1. I must make sure that I don't spend time on the work during the working day or at the company's premises
2. The work that I have created must not be related to the business that your employer was involved in
3. The work that I have created must not have been created when I was under the company payroll
4. The work must not be of the type that forms an integral part of what I was employed to do

Thus if I was hired as an engineer to work on improving quality control of LCD panels in an assembly line, I would be able to make a stronger claim to any work that I have produced if I had invented something unconnected to LCD panels that was worked on during my free time outside work.

Motive, Intention and the Act

2009-04-08T23:50:00.000-07:00

Motive is irrelevant to establish murder. What needs to be established are actus reus (the act) and mens rea (intention).

Motive is not synonymous to and does not equal intention. Motive is defined as a reason for doing something and could be a driving force. Intention on the other hand is more akin to an aim or plan. The Act is that which results in death.

Direct Effect

2009-04-08T10:27:00.000-07:00

The doctrine of direct effect was developed by the ECJ to give greater rights to the individual under EC law. Its application has now been considerably extended with regard to directives. - Justin Santiago

The ECJ developed the doctrine of direct effect through a series of cases to ensure that the body of law provided for in the EC Treaties would have effect in the various member states without the need for any intervening national legislative or executive action and comes into effect in the domestic legal order of member states automatically. The ECJ developed the doctrine of direct effect to make up for the limited avenues available to individuals to bring their case directly to the ECJ. The ECJ’s view was individuals should be allowed to enforce EU law through their national courts to reinforce the purpose and spirit of the EC Treaty and further the ultimate aims of the Community. National courts have an interpretive obligation to interpret as far as possible national legislation in order to achieve the objectives of Community Law.

The ECJ Court developed this doctrine and applied it to articles of the EC Treaties, to EC Regulations and in a more limited way to EC Directives. The point about directives is an interesting one because directives are brought into effect by further implementing measures in the sense that it is left to the national authorities the choice of form and method to achieve the result. This seems to contradict the decision in Van Gend en Loos which stated one of the conditions that would allow an individual to bring a case to the national court is that the operation of the law must not depend on further action by national or EC authorities.

The rationale to overlook this contradiction stems from the decision in VanDuyn v Home Office, where the court held that Ms Van Duyn could rely on a clause in a directive which the UK had not introduced into national law. The reasoning behind this judgement was that the state would be estopped from relying on its own wrongdoing to frustrate the rights of individuals under directives.

The ECJ has also attempted to extend the direct effect of directives beyond vertical effect situations - individuals could rely on directives against the State and emanations of the State – Marshall v Southampton and South West Area Health Authority but not against another individual Faccini Dori v Recreb srl the rationale being that individuals are not to blame for the non implementation of the directives but rather the state is to blame.

The attempt to extend the reach of the vertical effect of directives is based on the inequality that would arise as a result of a difference in an individual’s ability to bring an action based on a directive will depend on whether they are suing the state or a private person or company.

The ECJ has therefor attempted to extended the reach of the vertical direct effect of directives through various means. It has extended the meaning of what is a state to include an emanation of a state : Foster v British Gas to include entities that performed a public service that was pursuant to a measure adopted by the state, was under the control of the state and had special powers going beyond those of normal commercial undertakings.

In Kolpinghuis Nijmegen, the ECJ judgement appears to indicate that the obligation arises as soon as the directive has been adopted at community level regardless of whether or not the time limited provided for its implementation by the states has expired. This broadens the ruling outlined in Pubblico Ministero v Ratti where no action can be initiated because the state has not transposed the directive into national law or because it has done so inaccurately.

Another development which has lessened the impact of the Marshall/Dori no horizontal direct effect of directives rule is the recognition of the ECJ of circumstances in which the directives can have a limited form of horizontal effect when they do not directly impose legal obligations on individuals. The crucial factor in these horizontal cases is that one party suffers a legal detriment and the other party gains a legal advantage form the terms of an unimplemented directive. The case of CIA Security International v Signalson seems to suggest that states have an obligation to put a ruling into effect if the claimant would be more likely to succeed in his action than he would otherwise be. This effect - giving effect to a directive in a dispute between private individuals by imposing a requirement on the state - has become known as the incidental horizontal direct effect.

The case of Von Colson v Land Nordrhein extended the effect of directives to not only governments but on all national authorities including the courts to interpret national law in the light of an inadequately implemented or a non-implemented directive even in a case against an individual. The Spanish case of Marleasing clarified the implicit point that was brought up in Von Colson that the obligation of harmonious interpretation applies even in a case where the national law predates the directive. This point was confirmed in Pfeifer where the ECJ rules that the obligation of interpretation applies to the national legal system as a whole and not only to specific legislation implementing a directive. These cases opened to the back door to the horizontal effect of directives.

However where national courts actively interpret national law in the light of unimplemented Community Directives, interference with the legitimate expectations of private parties may result. Private parties may find themselves bound by obligations drawn by interpretation from Directives of which they are quite unaware. The ECJ has also made it clear that the doctrine is subject to the general principles of law such as legal certainty and non-retroactivity : Kolpinghaus and cannot be applied where it would give rise to or aggravate criminal liability : Criminal Proceedings against Luciano Arcaro.

In summary we can see a general widening of ability of individuals to bring an action to court to enforce directives and the circumventing of the direct horizontal effect rule via indirect effect and member state liability. The underlying threat running through the various cases is that national courts are under a duty to interpret legislation in the light of the wording and purpose of EU law.

Supremacy of EC Law over National Law

2009-04-08T10:18:00.000-07:00

The view of supremacy adopted by the ECJ has differed radically from that adopted by most of the member states. Explain with reference to the reaction in at least two of the member states to the ECJ’s interpretation of the principle of supremacy. - Justin Santiago

The concept of supremacy of EU law where EU law takes precedence over national law was never expressly stated in any of the treaties. The supremacy of Community law stems from the condition of membership of the EU that member states give priority to EU legislation over their own law. Additionally the creation and development of the supremacy of EU law was developed by the ECJ through a series of important rulings.

The concept of direct applicability states that certain provisions of EU law become national law without further enactment.
Directly applicable EC legislation overrides inconsistent domestic legislation – Factortame (No 2). Per Lord Denning in MacCarthy v Smith – we are entitled to look to the Treaty not only an aid but as an overriding force (Art 119). This principle was further developed in the case of Costa v Enel in which the case set out that community law had been integrated into the member states’ legal systems and was binding on them. It also declared the effect of unlimited duration of the application of EC law meaning, in the words of the ECJ “…it is impossible for a member state to set up a subsequent unilateral measure against a legal order they have accepted on a reciprocal basis.”

The ECJ touched on supremacy in the case of Van Gend en Loos v Netherlands ‘…the community constitutes a new legal order of international law for the benefit of which the states have limited their sovereign rights…that member states have voluntarily transferred sovereignty to the institutions of the community.” The ECJ also laid down conditions of justiciability (capable of being applied by a national court) namely that articles of the treaty could be pleaded in the national court provided the provision was clear and precise, it must be unconditional, its operation must not depend on further action by national or EC authorities and it must lay down a negative prohibition rather than a positive obligation has been whittled down .

The ECJ deployed a number of arguments to justify its conclusion that EU law should be accorded supremacy over national laws :-

1. The EC Treaty created its own legal order which immediately became an integral part of the legal systems of the member states.

2. The member states had transferred to the new community institutions real powers stemming from a limitation of sovereignty although this was not in reference to the constitution of any particular member state but simply by being a member of the EU.

3. The spirit of the community required that EU law was uniform and effective among all members in order to achieve the objectives of a common market

4. Obligations undertaken by member state in the Treaty would be merely contingent rather than unconditional if they were to be subject to later legislative acts on the part of member states

However members of the EU have varying levels of resistance towards this encroachment into national constitutional law and their courts have experienced particular difficulties in this respect. The question naturally arises whether there are areas in which the member states are no longer competent to legislate, and must defer to the EU. Areas of EU exclusive competence are generally held to exist, but it is by no means clear what they are

National courts have generally accorded supremacy to directly effective EC law, but frequently basing that supremacy on provision of national law rather than on the ECJ’s rulings and have expressed particular reservations in relation to fundamental rights recognised in national constitutions. Most of the courts of the member states regard themselves as possessing the ultimate Kompetenz-Kompetenz.

Germany

The German response to supremacy of EU Law has developed from one of outright rejection to one of acceptance based on the sovereignty of the German constitution. In the case of International Handelsgessellschaft GmbH v EVGF (Solange I) the Federal Constitutional Court held that although Article 24 (now Article 25) of the constitution allowed for the transfer of legislative power to international organizations but the question raised was whether Article 24 permitted the transfer to an organization such as the EC, of a power to contravene certain basic principles protected under the constitution itself. It was held that so long as the Community had not removed the possible conflict of norms between EC law and national constitutional rights the German court would ensure that those rights took precedence.

The rational was that in this present case, the constitution provided sufficient protection of fundamental human rights and that these rights were insufficiently protected under Community law as it was felt the Community lacked a democratically legitimated and directly elected parliament as well as a codified catalogue of human rights. As long as the recognition of human rights in the community had not progressed as far as those provided by the constitution, Community law could be ignored. There was therefor no redress for parties wronged to see whether Community law would have affected the outcome of the case.

This position was revised in Application of Wunsche Handelsgesellschaft (Solange II) in which the FCC would no longer exercise its jurisdiction to decide on the applicability of EU law as the legal basis for any acts of German courts or authorities and it will no longer review such legislation by the standard of the fundamental rights contained in the constitution.

However Solange II did not surrender jurisdiction over fundamental rights but only stated that the FCC would not exercise that jurisdiction as long as the present conditions as to the protection of fundamental rights by the ECJ prevailed. The FCC still preserved its final authority to intervene if real problems concerning the protection of fundamental rights in Community laws arose.

In the Brunner case it was decided that Germany’s acceptance of the supremacy of EU law was conditional and the FCC asserted its jurisdiction to review the actions of European institutions and agencies which included the ECJ to ensure that they remained within the limits of their powers and did not transgress the basic constitutional rights of German inhabitants.

Italy

Article 11 of the Italian Constitution permits limitations of sovereignty as are necessary to an organization which ensures peace and justice between nations. This has formed the basis of the Italian courts’ acceptance of the supremacy of EU law although this acceptance has not been unconditional. In Frontini v Minisetero dell Finanze the Constitutional Court stated that it reserved the right to hold fundamental rights protected by the Italian constitution to be supreme over EU law. The case of Fragd considered that a Community measure would not be applied in Italy if it contravened a fundamental principle of the Italian constitution concerning human rights protection.

UK

The central obstacle to acceptance by the UK of the supremacy of EU law is the constitutional principle of parliamentary sovereignty which in its traditional formulation holds that Parliament has the power to do anything other than to bind itself for the future.

Membership of the EU has not pushed parliamentary sovereignty of its pedestal. There is an increasing trend of the ECJ having a bigger bark in judicial decisions but whether that translates into a bigger bite is questionable. Supremacy of EU law over the domestic law of the UK is questionable.

The dualist approach taken by the UK to incorporating extra territorial legislation means that EU law had to be incorporated by the European Communities Act 1972 (ECA 1972). The extension of the interpretation of the supremacy of EU law by the ECJ has been thwarted by the following provisions and is aptly demonstrated in case law:-

S1(4) states that Parliament would enact all future legislation in conformance with EU policies

S2(1) states that all provisions of EU law which are intended to be directly applicable in the UK are given the force of law.

S2(4) states that Acts of Parliament passed after 1972 shall be construed and have effect subject to the provisions of the ECA 1972.

Per Lord Denning in Macarthys v Smith– we are entitled to look to the Treaty not only an aid but as an overriding force. However there was some pulling back in the case of Duke v GEC Reliance Systems where Macharthy is not applicable to domestic legislation which pre-dates the incompatible provision of EU law. It was felt in Duke that the Van Colson principle which required domestic law to be interpreted as far as possible in the light of EU law was no authority for the proposition that a court of a member state must distort the meaning of a domestic statute so as to conform with EU law.

The later cases of Lister v Forth Dry Dock, Pickstone v Freeman and Webb all point to the courts treading gently on domestic legislation and using the purposive approach to ensure compatibility with EU law. In Pickstone v Freeman the direct applicability rule was softened to accommodate domestic laws which was specifically designed to implement EC law. Lister v Forth Dry Dock took this further in that an extra clause was read in in order for domestic regulation to comply with the directive if a literal reading would not achieve the purpose. This is an example of the UK courts adopting a purposive approach, recognizing that Parliament’s specific purpose in passing a particular measure was to implement a provision of EC law.

There was a further acceptance of EU law in the case of Factortame II which culminated in the House of Lords granting interim relief the effect which would suspend the operation of an Act of Parliament. The acceptance by UK courts of the supremacy of EU law was further evidenced by the EOC Case where the HOL stated that there was no constitutional barrier to an applicant before any UK court and not only the HOL seeking judicial review of primary legislation which was alleged to be in breach of EU law.

The effect of these cases was that the courts would not actually invalidate the act which went to show that UK law was still supreme.

The case of Thoburn v Sunderland City Council and Others introduced the element of ECA being a constitutional statute that could be expressly repealed. In other words parliamentary sovereignty had created the ECA 1972 and parliamentary sovereignty dictated that parliament be the one to expressly repeal it. Purists have also have argued that the doctrine of parliamentary sovereignty has been untouched since the UK needed Parliament to pass the ECA 1972 before EU law became law in the UK. And it will be within the sovereignty of Parliament to repeal the ECA 1972 and prevent the continued operation of Community law within the UK.

All of these cases point to UK parliamentary sovereignty being firmly in the drivers seat nothwithstanding the ECJ notions of supremacy of EU law.

Using Facebook to serve default judgements

2009-04-05T18:57:00.000-07:00

You've been served: Aussie couple lose home via Facebook - AAP, December 2008

In what he believes is a world first, lawyer Mark McCormack tracked down a couple who had defaulted on a six-figure loan using the internet and served them with a default judgement.

Mr McCormack says the ACT Supreme Court allowed him to serve the couple via Facebook as well as leaving the actual court papers at their last known address and sending emails.

Earlier this year lawyers acting for the Bulldogs NRL club served player Sonny Bill Williams with a subpoena via SMS text message.

Williams was in Europe after defecting to French rugby club Toulon.

Mr McCormack, himself a keen Facebook user, says using the popular social networking site to contact people who flee is the logical "next step".

"I think the courts will continue to adopt it on a case by case basis," he said.

"They will (just) need to assure themselves that it is reasonably likely to bring (the court's decision) to the attention of the parties concerned."

Mr McCormack said his legal firm, Meyer Vandenberg Lawyers, hadn't been able to find any other examples of Facebook being used to serve a court judgement.

The lawyer is acting for a lending institution which loaned the Canberra couple more than AUS$100,000.

When they defaulted and couldn't be found at their listed residence, he had to get creative.

The lawyer obtained a default judgement in the couple's absence and was able to convince the court to serve it via Facebook.

The fact the defaulters' Facebook accounts included their names, dates of birth and listed each other as "friends", was enough to persuade the court it had the right people in its sights.

Infiltration of Trusts into Commercial Law

2009-04-05T14:50:00.000-07:00

What differentiates the Quistclose trust from other trusts, is the existence of the specific purpose for which the sums on credit must be applied, and the failure of which gives rise to the trust. - Justin Santiago

Quistclose Investments Ltd v Rolls Razor Ltd held that a trust situation could arise in situations where money that is owed becomes the subject matter of the trust provided that the money had been segregated for the purpose of repaying the debt. The extra ingredient required to elevate a loan to such a Quistclose trust is an intention that the money advanced be used for a particular purpose rather than being at the general disposal of the borrower. In Quistclose itself this extra ingredient was supplied by the bank's stipulation that the loan be employed in paying a dividend to shareholders.

However there are other differences between a Quistclose trust and a normal trust. Following Knight v Knight (1840) 3 Beav 148 a trust is created if the words used are imperative and if the property and objects (i.e. persons intended to be benefited) are sufficiently identified. This dictum is usually reduced to the phrase that the three certainties must be present: certainty of intention, subject matter and objects.

To determine certainty of intention we have to examine the words and conduct of the proposed settlor to see if these conform to an intention to create a trust.This is provided by the requirement that the money be used only for the stipulated purpose.
Furthermore there was segregation of the loan monies from the borrowers' other assets.

As for certainty of subject matter it is the debt that is clearly the subject matter.

The difference of a Quistclose trust lay in its lack of certainty of objects The 'beneficiary principle' requires of a trust that it have ascertainable human beneficiaries in order to be valid : Morice v Bishop of Durham. The permitted exceptions are charitable trusts and a limited number of non-charitable purpose trusts. At first sight the Quistclose trust appears to offend against the beneficiary principle. The trust seems to fall into the category of non-permitted purpose trust, the purpose of which is to pay off a debt.

The Quistclose trust has been argued to be a resulting trust in favour of the person who originally advanced the credit, and the person to whom the sums were advanced holds them as trustee. The resulting trust occurs because the purpose of the trust to pay dividends to shareholders could not be fulfilled.

Additionally proof that the Quistclose turst it is not an express trust is the lack of formality requirements of section 52(1)(b) of the Law of Property Act 1925 which requires that a declaration of a trust must be manifested and proved by some writing and signed by some person who is able to declare a trust.

How do I claim the copyright to my work if I am an employee

2009-04-05T02:41:00.000-07:00

How do claim the copyright Do I own what I have produced - Justin Santiago

Sounds like a silly question. Of course I would - I am the author (producer for sound recordings, producer and principal director for films or publisher for typographical arrangements). However there is one important statutory exception under the Copyright and Related Rights Regulations 1996 where it is stated that if a literary, artistic, dramatic or musical work or a film is created by an employee in the course of his employment, that employee's employer will be the first owner of copyright in the work.

If I was an employee and wanted to claim the copyright to my work I would have to take note of the following based on Ultra Marketing (UK) LImited and Thomas Alexander Scott v Universal Components Ltd :-

1. I must make sure that I don't spend time on the work during the working day or at the company's premises
2. The work that I have created must not be related to the business that your employer was involved in
3. The work that I have created must not have been created when I was under the company payroll
4. The work must not be of the type that forms an integral part of what I was employed to do

Enbloc Sale of Property

2009-04-04T18:38:00.000-07:00

It's final: Horizon Towers sale is off
By Joyce Teo, Property Correspondent
Straits Times, Singapore, 5th April 2009

THE Court of Appeal halted the contentious Horizon Towers collective sale once and for all yesterday with a hard-hitting ruling that singled out the estate's sales committee for scathing criticism.

The dramatic judgment caught many by surprise and vindicated the four sets of minority owners who opposed the sale from day one - about 3-1/2 years ago, when the idea was first mooted - and spent nearly $1.5 million in legal costs.

One of those owners, Mr Hendra Gunawan, told The Straits Times yesterday: 'I am very happy that at last we can protect our homes.'

'We can't do anything about it if 80 per cent agree to sell but they have to do it properly so that everyone's home will be sold at a proper price.'

Industry experts are also hailing the decision as a landmark judgment that will set clear parameters for en bloc deals.

Yesterday's ruling was clear in its condemnation of the way the en bloc process was conducted and was particularly critical of the estate's sales committee.

Among a litany of criticism, it pointed to the committee's failure to follow up on a higher offer for the estate, its undue haste in agreeing to a sale price in a rising market and its sloppy procedures in appointing a marketing agent and keeping owners up to speed on the transaction.

But perhaps the most serious censure was directed at its failure to take heed of a possible conflict of interest that arose when two owners bought additional units in the estate just before they were appointed to the sales committee.

'The sale committee's duty is to achieve the best price under the circumstances, and not just a fair price,' said Mr Karamjit Singh, managing director of Credo Real Estate, which has handled many collective sales but not that of Horizon Towers.

The Strata Titles Board, which backed the sale, was also criticised for the way it took too much at face value - whether opinions on price or legal points - when it should have been more questioning. It was also rapped for not being more vigilant on the possible conflict of interest issue regarding sales committee members.

One immediate effect of the ruling is that one of Singapore's most drawn-out en bloc deals is finally over.

The sale of the Leonie Hill estate was first mooted in October 2005. The owners agreed to a reserve price of $500 million the following year, just before the dramatic run-up in the property market.

A deal was signed in January 2007 when the majority owners accepted a price of just below $850 per sq ft of gross floor area from Hotel Properties and its two partners.

The 199 owners of the 99-year leasehold estate would each have pocketed about $2.3 million while the 11 penthouse owners would each have received around $4 million to more than $6 million.

A series of court challenges followed. Even some majority owners turned against the deal when they saw how the soaring market had made their sale price look like a giveaway.

The property market has since slumped and the en bloc market has dried up.

'On paper today, the owners would have lost out, but probably by just 10 per cent,' said a property expert who declined to be named.

Only a handful of the minority owners who objected to the sale fought on until the end, spending millions along the way.

Mr Ng Eng Ghee, Mr Gunawan and his wife Sulistiowati Kusumo and Madam Ong Sioe Hong were represented by Harry Elias while Mr Rudy Darmawan represented himself, his wife and aunt at the hearing.

Madam Ong said her group incurred expenses of more than $1.5 million. Another group of objectors - who fought against the sale earlier - has spent around $1 million. Property industry experts said yesterday's landmark ruling has struck a decisive blow for transparency.

'This is the first time the court of appeal has held in favour of the minority owners,' said Mr Phillip Fong, a partner of Harry Elias Partnership, which represented four minority owners.

'There's now substantial clarity on the extent of the duties of the sale committee.'

Credo's Mr Singh said: 'The judgment is undoubtedly significant. It clarifies what constitutes, for example, good faith and conflicts of interest.'

Consideration and Promissory Estoppel

2009-04-03T20:16:00.000-07:00

"To what extent, if at all, do the principles of consideration and promissory estoppel give the courts the power to enforce, or set aside, promises in the interests of fairness and justice?" - Justin Santiago

The requirement of consideration to support a promise has been debated. This is especially true when parties modify their obligations in the light of changed circumstances. In such cases the courts have invoked the equitable doctrine of promissory estoppel to enforce a promise not supported by consideration. This discussion will focus on whether the use of promissory estoppel is justified in the light of the importance of having a promise supported by consideration.

Consideration as a requirement for a valid contract stems from the idea of reciprocity as expressed by Lush, J in Currie v Missa that each party accrues a right, interest, profit or benefit in return for some forbearance, detriment, loss or responsibility given, suffered or undertaken.

As an example if I were to pay you fifty pounds to you for mowing my front lawn, I would suffer a loss of fifty pounds but gain the benefit of neatly trimmed front lawn. You would on the other hand suffer the loss of a free afternoon of leisure but gain the benefit of having an extra fifty pounds.

The concept of reciprocity works well in contracts without any modifications in the obligations by either party in light of changed circumstances. However this is not the case where obligations have been modified halfway through the contract. Courts were initially very strict with the consideration requirement as in the case of Stilk v Myrick where the sailors failed in their bid to enforce the promise of extra money for doing additional work due to the desertion of some of the crew as it was decided the performance of an existing contractual obligation did not constitute valid consideration. Similiarly in a long line of cases such as Pinnel’s Case and Foakes v Beer, the courts have never recognised part payments of debts as being valid consideration as the payment of a smaller sum that is owed does not constitute valid consideration as there is no added benefit to the creditor.

It is as if in the mowing the front lawn example you suddenly demanded to have an extra 10 pounds in the middle of the job because it started raining and it made the work more difficult and the fact that you get a good soak in the process. The argument for this case would be that you have undertaken the job and have factored in any additional risks that might occur in the process of completing the job and as such are not entitled to any additional benefit since I do not gain any additional benefit.

Courts in later cases have tried to resolve the issue of unfairness by cases by relaxing the consideration requirement in the name of fairness and justice. In Williams v Roffey Brothers the parties to a continuing contract wished to modify their obligations in the light of changed circumstances. The courts allowed the promisee to enforce the promise even though they were performing existing contractual obligations as the promisor had obviated a disbenefit by not having to switch contractors midway through the project.

I would however argue that the decision in this particular case would have the effect of rewarding the promisee for their ineptness and forcing the promisor into a corner otherwise he would not be able to get the work done.

This decision gave birth to the doctrine of promissory estoppel in the case of Central London Property Ltd v High Trees House. In this case a person will not be allowed to go back on his promise even through the promise was not supported by consideration where the promise was unambiguous, the promise was intending to be relied on and it has been relied on. In this case the additional requirements are would act as mechanisms to protect both parties.

Following the mowing the lawn example, if I had agreed to your request for an additional 10 pounds and you went ahead and bought a hat and boots to make your job easier then the courts may invoke the doctrine of promissory estoppel in the name of fairness.

It appears that courts will still rely on consideration for evidential purposes to determine the validity of a contract. In that sense the doctrine of promissory estoppel requires some element of evidence in order to make a decision in the interest of fairness and justice.

Essay Questions and Problem Questions

2009-04-02T22:26:00.000-07:00

So, how do you ensure that you ‘answer the question’? Let us first discuss essay questions, and then problem questions.

Essays

The ‘trick’ here is to deconstruct the question asked. Take the question to bits,and play it back to the examiner, explaining the issues which the question raises. Take,for example, the following question from a few years ago:

Any system of law which recognised the trust would have need of the automatic resulting trust, for this merely provides the mechanism by which property ineffectively given on trust beneficially remains with the would-be donor. On the other hand, there is no similar need for the presumed resulting trust, which is anachronistic and has largely outlived its usefulness.

Discuss.

The first thing to notice is that the examiner has not said, ‘Please write every thing you know about resulting trusts’. Yet, the vast majority of candidates will answer the question as if he did. What the examiner has instead done is ask a specific question, and the first thing to do is identify exactly what that is. And that is done by simply playing back the question in different language. So here, we could say that the question raises a number of issues.

First, it assumes that there are two types of resulting trust, the presumed and automatic. One issue is whether such a distinction is valid. Second, on the assumption that there really are resulting trusts which are ‘automatic’ (and the meaning of that word will need to be explained), the next question is whether such trusts are needed. Is there no other way of dealing with the situations to which they are a response? Third, is it correct to say that such trusts arise because the property ‘beneficially remains with the would-be donor’? And fourth, what is the true based of presumed resulting trusts? What is the presumption in play in such cases? And can it really be said to be anachronistic?

Notice that in deconstructing the question, you have provided yourself with a structure for your answer. Moreover, you have ensured that everything you then say will be of relevance to the question asked. After that, you can’t go wrong!

Problem questions

These again are not an invitation for candidates to write all they know about a particular subject. So, the first three pages of your answer should NOT consist of a potted summary of the law on, for example, secret trusts. The examiner will simply get out a red pen and score through this part of your answer. What you should instead do is identify the broad area of the question (‘This is a question on secret trusts’) and then the specific issues it raises (‘There is a problem as to the timing of the communication of the terms of the half-secret trust’; ‘there is a problem as to the lack of written evidence concerning the alleged declaration of trust respecting Blackacre’; ‘there is a problem in that the communication was made to only one of two trustees’; etc, etc’). Not only have you now got a structure for your answer, but you also have a check-list to which you can refer to ensure that you’ve not omitted anything important from your answer. There’s nothing worse than coming out of the exam room and saying to yourself, ‘Oh, I forgot to mention the communication point’. Detailing the issues at the start helps prevent this.Moreover, it demonstrates to the examiner that you are someone who knows what they’re talking about.

How much can I take and use?

2009-03-30T19:23:00.000-07:00

Suppose I was an engineer working in a factory and have learnt a certain technique. I improved on the technique and left the company and went out and d set up an engineering company selling machinery that utilised that improvised technique. Can I do that? - Justin Santiago

The area of law is called breach of confidence which has developed through the common law and equity and deals with an obligation of confidence by parties in a certain relationship who have a responsibility not to disclose or use confidential information.

There are three important points that need to be discussed in order to ascertain whether the engineer has committed a breach of confidence following Coco v Clark - whether information about the technique had the necessary quality of confidence, the relationship between the engineer who receives the information from the factory that imparts it that imported an obligation of confidence and whether the use of the information was authorised.

Firstly to have the necessary quality of confidence the technique must not be in the public domain, it must be a trade secret. Information that has been released by the owner including a patent application is considered to be in the public domain. Also if the information allows the engineer to have an unfair advantage in the marketplace as a result of obtaining the information under the springboard doctrine then this too would impart a quality of confidence to the information.

Thus if the technique was not known to the general public and if knowledge of the technique allowed the engineer to 'springboard' when setting up his own business then the employee is said to have committed a breach of confidence. It could be argued that the improvisation would negate the breach it it was radically different from the original technique.

Secondly the relationship between the engineer and the factory must be ascertained. If it is one of a contractual relationship such as employer-employee then a number of factors are considered whether the engineer owed a duty of confidence in respect of this information depending on the nature of the employment and the nature of the information. It is also important to distinguish between trade secrets that the employer could claim as his property from the skills, experience, know-how and general knowledge that the employee could regard as his property as only the former could be subject to an obligation.

The third point about unauthorised use of information occurs where information is used to compete with the person owning the information as in Seager v Copydex.

Speak Without Fear

2009-03-29T05:09:00.000-07:00

Speak Without Fear – a 2 day program to eliminate the fear of speaking to an audience - Justin Santiago

Joey breaks out in a cold sweat each time he goes to bed. Just after the lights go out his imagination goes wild. Monsters and demons start multiplying and coming out of every corner of the bedroom. This goes on until one day he discovers that these creatures only come out when it is dark and when he is alone. He realizes it is all in his imagination and he can choose to think about it and be fearful or just block it out of his mind and have a good night’s sleep.

We all feel a little bit like Joey each time we give a presentation. Every possible fear – fear of our colleagues laughing at us, fear of our capability being judged by our boss, fear of not looking good in front of our subordinates, start multiplying like Joey’s horrible monsters. There is a need to come to a stage of realization, just like Joey, so that we are able to deliver our message without fear. Or we can simply sleep with the lights on, hoping that the monsters and demons will go away.

I would like to challenge you to a simple test. Imagine that you are reporting what you have achieved in the last quarter at work. Your immediate colleagues and supervisor are seated in conference room. The lights are dim, the bright projector is on and colourful PowerPoint slides are being projected on to the screen. At the same time list down what you think your colleagues and boss are thinking as your presentation unravels. Write every little thought that they could possibly think of. Once you have exhausted your list take a deep look at what you have just written.

Now cross out all those thoughts that pertain to you rather than your speech. Notice how many crosses there are? Now look at those thoughts that remain uncrossed. This is what is REALLY on peoples’ minds when you are talking to them. People are interested to hear what you have to say rather then hear you. Get that big ego out of the way, you are not under the glare of the spotlight! It’s a bit hard to take but it’s the truth! You are the messenger and not the message. Get the thought “I am the important one here” out of your head and focus on how much more informed, persuaded or entertained your audience is going to be.

People who focus on their speeches instead of themselves find that they can immediately warm up to the audience. Their speeches are targeted at their audience, they look at their audience and they speak with and not speak at their audience. In no time their audience is eating right out of their hands.

If we are to succeed in speaking in public we have to stop thinking of presentations and speeches as a kind of performance but an act of communication. How many nights have we spent trying to memorize every word to the letter, thought about the exact second to crack that witty one liner, only to find that once the presentation is over we are back in our seats stumped by the number of stumbles, fumbles and blunders that sprinkled every other line.

There is no such thing as a perfect speech. No matter what, we will end up saying something that wasn’t planned or making an unplanned swaying of our hands. The important thing is to accept that such things happen and proceed as if nothing happened. What the audience is looking for is a well thought out speech that communicates clearly and directly and not a well executed triple somersault. Don’t worry about those in the audience who are more keen on looking out for mistakes. They are in the minority and are going to judge you no matter what. Focus on your speech and gaining the respect of the majority and not the attention of these few.

Justin Santiago is the developer and trainer of the two-day Speak Without Fear programme which has helped toddlers and university lecturers alike eliminate their fear of speaking to an audience.

How Big UK Groups Paid No Corporation Tax in 2007

2009-03-28T18:38:00.000-07:00

How Big UK Groups Paid No Corporation Tax in 2007 - Following the Ways of Big Corporations -
Reported in the Times of London 20 May 2008

Some of the biggest companies in the UK such as Cadbury, Standard Chartered and British American Tobacco paid zero corporation tax in Britain last year. How do they do it when citizens ordinarily have to cough up huge fines for being later in declaring their income tax let alone having to pay the tax itself ? The answer for these corporate giants lies in having lots of overseas operations which then escape the high taxes at home. Suppose you too could do the same? Is there a way to earn overseas income and yet able to avoid local tax? One way is to own overseas property which would earn you a rental income - tax free! That way you would be following the Rules of the Rich and not following the poor herd.

Hudud Law Replaces the NEP as the New Battle Cry

2009-03-28T18:28:00.000-07:00

- Justin A Santiago

Malaysians used to be fixated on Malay rights and vernacular education. Malay politicians would use Malay rights as their battle cry to gain the support of the Malays and Non Malay politicians would use the preservation of vernacular eduction as their battle cry to gain the support of the Non Malays.

The fixation is beginning to unfix itself.

The Malays themselves are beginning to see the ill effects of the New Economic Policy (NEP) which includes its abuse by the politicians themselves and the stigma of being unable to survive without a crutch. The Non Malays have realised that vernacular education is not able to provide the education necessary for globalised citizens in a globalised world.

The new tune that has been composed for the battle cry is Islamic law or Hudud. The now resurgent Islamist party, Parti Islam SeMalaysia (PAS) which is the governing coalition partner in 5 out of the 13 states wants Hudud implemented in Malaysia whereas its other coalition partner, the Democratic Action Party (DAP) says over its dead body. Invariably the Muslim majority (mostly Malays) will side with PAS and the non Muslim majority (mostly non Malays) will side with DAP leading to possibly another generation worth of time wasting and politicking.

This fixation will continue with the minority, already weakened politically and almost invariably economically, having to tolerate increasing religious subjugation just like how they have tolerated Malay supremacy over the last 39 years ever since the NEP came into being in 1970.

Leasehold Covenants

2009-03-28T18:26:00.001-07:00

Were the defects in the law relating to the enforceability of leasehold covenants so serious as to justify the scheme introduced by the Landlord and Tenant (Covenants) Act 1995 for leases granted after 31 December 1995? - Justin Santiago

The Landlord and Tenant Covenants Act (LTCA) 1995 provided a new set of rules governing the enforceability of leasehold covenants under the broad category of the law governing the conduct of landlords and tenants. Leasehold covenants are those terms agreed in a lease that relate to the parties obligations in their capacities as landlords and tenants. The law related to leasehold covenants before 1995 were mostly derived from common law and the LPA 1925. This has changed with the Landlord and Tenant (Covenants) Act 1995 and applies to leases granted after 1996.

The arguments below will show the defects of common law regime and the inadequacy of the LPA in three broad areas :-

1. The principle of continuing liability with its over emphasis on the doctrine of the privity of contract
2. The different abilities of the original tenant and the original landlord to sue on personal covenants and on legal and equitable leases and the difference in treatment of legal leases and
3. The vagueness of terms such as touch and concern land which required extensive judicial interpretation

There will also be a discussion on how effective the LTCA has been in resolving these deficiencies.

The original landlord (L) and tenant (T) had continuing liability for and can be sued on all covenants for the entire term of the lease, even after the assignment of the reversion by L or the assignment of the lease by T, due to the privity of contract. However it was unjust unjust that both L and T should be held liable for breach of any covenant for the whole duration of the lease, even if the breach was performed by a subsequent landlord (AL) or subsequent tenant (AT). Such covenants vulnerable to breaches include, inter alia, paying rent, performing repair obligations and to use the leased land only for the stipulated purpose. Compelling the original T to rectify the breach could prove to be costly, more so if he is going to liable for all other subsequent assignees’ breaches.

Also, by comparing the scope of both AL and AT’s liabilities and abilities to sue, it can be seen that AT has a more limited scope to sue. AT’s ability to sue depends on the rule in the Spencer’s Case, one of the criteris is, (1) there must be a legal lease, (2) there is an assignment of the lease by deed; (3) there is privity of estate between L and T; and (4) the covenant must touch and concern the leased land. Where there is privity of estate, the benefit and burden of covenants relating to L’s land run with any assignment, such that the assignees will be bound by them, pursuant to S78 and S79 LPA 1925.
Therefore, AT may only enforce covenants in a legal lease.

AL, on the other hand, has the ability to sue pursuant to S141 LPA 1925, on covenants in all leases which have reference to the subject matter of the lease pursuant to S142 LPA, which includes legal leases, equitable leases and oral leases, which are leases for a term not exceeding 3 years at the best rent reasonably obtained under S54(2) LPA 1925. This shows that L has a wider scope to sue while T has a limited scope to sue.

There were also question on which covenants touch and concern the land and which have reference to the subject matter of the lease. If these could not be determined, they could be deemed to be personal and thus could not bind any assignee of the reversion or the lease.

LTCA 1995 was enacted to reform some of these rules. It, however, applies to tenancies created after LTCA 1995 takes effect on 1 January 1996. Tenancies created before that continue to be governed by the previous common law rules. It balances the rights of L and T and is now more certain compared to the pre-1996 rules.

LTCA 1995 abolishes the rule that the original parties continue to be liable for all covenants, whether personal or otherwise, and added the onus of release from the covenant on L. LTCA 1995 also releases T from all obligations, save for a few exceptions, and included a special provision for recourse against any occupier other than T himself. His burden for breaches of covenant are reduced S17 T needs to be notified by L/L1 of the breach of the covenant by T1 and is liable up to a maximum of six months. Previously there was no time limit in which he had to be notified of the breaches committed by subsequent assignees.

S3 provides that the benefit and burden of all L and T covenants shall pass on an assignment, except for those that are expressed to be personal, per S3(6)(a). LTCA 1995 does not require the differentiation between covenants that touch or concern the land, or covenants having reference to the subject matter of the lease. Instead, it distinguishes covenants that are expressed to be personal, as these are the covenants that continue to bind the original parties to them for the whole term, due to the doctrine of privity of contract. One must note that the lease must stipulate that such covenants are intended to be personal, or else they will pass upon assignment and bind the assignees.

After the assignment of the reversion, the original L would not be liable for or entitled to the burden or benefit of the covenants only if he has applied to be released under S6 in accordance with the procedure set out in S8. Thus, L has the onus of applying to be released from the covenants after an assignment, otherwise he continues to bear the danger of being sued.

After the assignment of the lease, the original T would be released automatically from all the landlord and tenant covenants, per S5. S16 provides that upon an assignment, T may be required by L to enter into an authorized guarantee agreement (AGA) to guarantee the AT’s performance of the covenants. S11 provides that neither L nor T shall be released if the assignment is one in breach of a covenant or by operation of law. Thus, although T is automatically released per S5, he may continue to be liable if he is a guarantor under S16, or if the assignment is an excluded assignment, or if the covenant is expressed to be personal.

LTCA 1995 has no application to sub-leases, but in cases where a sub-lease is granted, L now has a recourse against the sub-tenant, pursuant to S3(5), in respect of a restrictive covenant, whereby it can be enforced against any occupier of that premises. Alternatively, he may rely on Contract (Rights of Third Parties) Act 1999 if the covenant was intended to benefit and bind successors and assignees.

However the 1995 Act did not affect covenants expressed to be personal : BHP Petroleum v Chesterfield – personal covenants are not affected by the statutory scheme of release however the Court of Appeal decided that landlord covenants are not released by the statutory mechanism and the original covenantor remains liable despite having parted with all interest in the property. The problem here is with regard to the term expressed to be personal.

Also London Diocesan Fund and others v Avonridge Property Company Ltd House of Lords has ruled that landlords can draft their way out of the statutory release provisions of the Landlord and Tenant (Covenants) Act 1995.

Leases and Licenses

2009-03-28T08:20:00.000-07:00

It is now becoming increasingly difficult to distinguish between a lease and a license. - Justin Santiago

It used to be that defining a lease or license was simply based on defining a lease according to a criteria based approach. A lease grants exclusive possession of the land for a certain fixed or periodic term, in consideration of premium or periodical payments. The importance in defining a a lease was because a lease was an interest in the land and had the ability to bind subsequent purchasers of the land unlike a license which was merely a personal right. A lease can be associated with covenants that are capable of running with the land, and binding successive owners. This is impossible with a licence.

It is important that leases and licenses are distinguishable as they define different obligations for the parties. Landlords would naturally want to grant only a license in order to avoid the various implied obligations by the landlord to keep the property fit for habitation S8 of the Landlord and Tenant Act 1985 and keep in repair and proper working order structure, exterior and installations S11-16 of Landlord and Tenant Act 1985 and the ability to deny exclusive occupation to occupiers and the ability to exclude them from the property at any time. Tenants on the other would prefer that they had a lease which could be sold, given away or left by will putting much power in the hands of the tenant. Additionally they bind third party purchasers of the landlord’s reversion.

The difficulty in distinguishing leases from licenses stems from the difficulty in putting them into separate compartments. There are different shades of leases and licenses and not all are the same. There exist a continuum rather than separate categories. The reality is that leases and licenses do not exist as labels but as to the effect that it seeks to achieve. This is more akin to the intention based approach.

What is more important than the classification is to try and answer the important question of what did the parties seek to achieve when they entered into the agreement. Did they intend to give an interest in the estate? Was the interest intended to bind third parties? Was there intention for successive owners to be bound by covenants?

The difficulty in distinguishing a lease from a license stems from the inadequacies of the criteria based approach as it has been found in several cases that the criteria are not always certain. -

Exclusive Possession

Street v Mountford hinged on whether the grant conferred exclusive possession. This reasoning was followed in Bruton v London Housing Quadrant where a transaction carefully described as a license was interpreted as a lease because the agreement gave exclusive possession hence creating a lease.

However this criteria based approach if applied strictly could lead to injustice and the courts have intervened to give effect to intention of the parties :-

Agreements containing sham devices purported to deny the occupier exclusive possession as exemplified in Antoniades v Villiers where it was held that an agreement provided for the separate occupancy of an unmarried couple in what was to be their home was held to be a tenancy because the separate agreements was clearly a sham device and the doctrine of pretence would be invoked whereby the courts would strike down the sham devices purporting to deny the occupier exclusive possession since it was clearly evident that the unmarried couple intended to have exclusive possession of the property.

Clear Channel UK Ltd v Manchester City Council in which there was no intention to grant exclusive possession and hence no lease.

Mehta v Royal Bank of Scotland – despite apparent exclusive possession, the occupier of a hotel room was said to have a licence, presumably because it is never intended to create a leaseof such a property.

Where there is no power to create a lease - Gray v Taylor where occupation of an almshouse did not indicate the existence of a lease since the charitable trustees who were landlords did not have the power to create a tenancy,

Exclusive possession does not necessarily connote a tenancy if there are other factors of greater significance to be considered such as absence of the four unities necessary – interest, title, possession and time to support a joint tenancy for the whole premises : AG Securities v Vaughn.

Norris v Checksfield where the right to occupy was given to an employee for the better performance of his duties and therefor not held to be a lease

Bostock v Bryant – act of generosity

Heslop v Burns – where there is no intention to create legal relations at all in a family situation

Fixed term

Leases must have a fixed beginning and a fixed end and be determined at the outset – this would define the term of years absolute laid down by S205(1)(xxvii) LPA 1925 and distinguish a leasehold estate from a fee simple absolution in possession, one of two legal estates according to S1(1) LPA 1925.

This was decided in Lace v Chantler where a lease for the duration of the second world war was held void as being of uncertain maximum duration.

Parliament has pushed for certainty of duration in leases – Validation of War Time Leases Act 1944 was enacted to that converted all war time leases to a term of 10 years with a proviso that either landlord or tenant could terminate the lease once the war ended by giving a month’s notice.

Similarly lease for life and lease until marriage are void but both are saved by S149(6) LPA 1925 which says that these leases are for 90 years and come to an end when the tenant dies.

Perpetually renewable leases are converted into terms of 2000 years : S 145 LPA 1925.

There has been some uncertainty with regard to periodic tenancies i.e. those which repeat indefinitely until ended by notice to quit being given by either party. This sits uneasily against the requirement of certainty of term since the maximum term cannot be predicted at the beginning of the periodic tenancy. There are three different types of reasoning :-

Ashburn Anstalt v Arnold was an attempt to break away from Lace v Chantler as it was stated that a periodic tenancy amounted to a lease on the basis that the term could be rendered certain by action of one of the parties.It was thought that there are good and sound commercial reasons for this. However this line of cases has been overruled by the House of Lords in Prudential Assurance v London Residuary Body (1992) 3WLR 279 that a leasehold term must be certain from the outset. The term relating to the ability of either party to determine a yearly tenancy on six months’ notice to terminate if there was road widening works to be undertaken was not enough. and as a result the tenancy had been lawfully determined. This brings the law back to Lace v Chantler and supports the argument that tit is becoming increasingly difficult to distinguish a lease from a license.

Premium/Periodical Payments

Under S205 of the LPA, rent is not an essential requirement of a lease. Although not a requirement, the courts have decided if a certain sum is paid regularly then it goes towards showing there was a periodic tenancy. In Bostock v Bryant the obligation to pay fluctuating utility bills could not be regarded as rent, being an uncertain sum. Therefor the issue of whether payment of rent determines a lease remains uncertain.

Coownership of Property

2009-03-25T18:36:00.000-07:00

Coownership of property requires an understanding of concepts of joint tenancy and tenancy in common as this would determine how property would be passed under the right of survivorship.

Legally co-owned property would mean that the owners hold the legal title on trust for themselves as beneficial joint tenants : Goodman v Gallant. They would also hold the property as joint tenants in equity.

Williams v Hensman set out the three ways in which equitable joint tenancy can be severed into an equitable tenancy in common under the old rules of equity (preserved by LPA 1925 S36(2). They are in effect :-

a. alienation of her interest inter vivos by a joint tenant
b. mutual agreement
c. any course of dealing which shows that the interests of all were mutually treated as constituting a tenancy in common. This point would be especially relevant if one party orally agrees to sell the other party his or her shares.

Additionally severance will be effected if a joint tenant serves a notice of severance in writing satisfying S36(2) of the LPA - no requirement to sign. The written notice must contain an unambiguous declaration of an intention to sever with immediate effect; not at some time in the future; or an intention to ask the court to sever : Harris v Goddard and the notice must be given to the other party. LPA 1925 S196(3) equates service with giving and will be effective if left at the intended recipient’s last known place of abode : Re 88 Berkeley Road. In Lord Newborough v Jones the notice would have to be left in a way which could reasonably be expected to bring it to the attention of the recipient.

This follows the requirement of LPA S53(1)(c) a disposition of a beneficial interest would need to be in writing and therefor evidential requirement in writing would have to be produced to show that there was disposition of the interest to prevent fraud on the part of other parties.

Under a joint tenancy interests cannot be passed. However under a tenancy in common interests can be passed under the right of survivorship. Therefor where one party wants to pass on the property after death it is important to determine the act of severance. To claim an interest it will therefor be for the person claiming the interest from the dead person to show on a balance of probabilities that the joint tenancy was severed before death. If not the interest would rest with the other joint tenants.

The second line of argument would be where equity would recognize a severance by mutual agreement even where the agreement which causes the severance is unenforceable in its own right due to lack of formality : Burgess v Rawnsley. As per Lord Denning’s obiter, “It is sufficient if there is a course of dealing in which one party makes clear to the other that he desires that their shares should no longer be held jointly but be held in common…”

If it can be established that there was severance and there existed a tenancy in common then the aggrieved party is sad to hold a beneficial interest in the property. As a beneficiary she will have a right to occupy the land under Trust of Land and Appointment of Trustees Act 1996 (TOLATA 1996) S12. An application of sale of the property could be made under TOLATA 1996 S14 but subject to S15 which sets out the matters to be considered by the court in hearing such an application :-

1. Intentions of the creator of the trust
2. Purposes of the trust
3. Welfare of any minor whose home is in the property
4. Interests of any secured creditor

Under the Trusts of Land and Appointment of Trustees Act 1996 S15(2) asking the court to use its discretion to have regard to the circumstances and wishes. There is wider discretion in favour of families under S15 The Mortgage Corporation v Shaire. However the situation might have been different if the interest in the land had been insignificant : Bank of Ireland Home Mortgages v Bell.

The rules with regard to the evaluation of the interests of parties were recently considered by the Court of Appeal in Oxley v Hiscock. If the claimant has an interest in the house, the value of that interest is ascertained at the time the property is sold. Accordingly, any increases or decreases in the value of the property are taken into consideration. If a party remains in occupation paying the mortgage, rates and other outgoings, he or she is credited with these expenses. Conversely, the party in occupation is debited with occupation rent for using the premises partly owned by the other. In Oxley the court identified three approaches thus:

1. The approach adopted by Lord Diplock in Gissing v Gissing and Nourse LJ in Stokes v Anderson, the respective shares of the parties are not to be determined at the time of the acquisition of the property but are left to be determined when their relationship comes to an end or the property sold. Thus, a complete picture of the whole course of dealing is available to the court in order to determine what is fair.

2. The approach suggested by Waite LJ in Midland Bank v Cooke - the court undertakes a survey of the whole course of dealing between the parties in order to determine what proportions the parties must be assumed to have intended from the outset for their beneficial ownership. Thus evidence of what the parties intended at the time of the acquisition may be inferred from the conduct of the parties while they were living together.

3. The suggestion put forward by Browne- Wilkinson V.C. in Grant v Edwards and approved by Walker LJ in Yaxley v Gotts - the court in its discretion makes such an order as the circumstances require in order to give effect to the beneficial interest in the property of the one party, the existence of which the party with the legal title is estopped from denying.

In Oxley the Court of Appeal expressed a preference for the third approach. The second approach was capable of leading to an artificial or fictional intention of the parties. Likewise, the same point could be made of the first approach i.e. at the time of the acquisition the parties’ intention was that their shares should be left for later determination.

Equitable Interest in Land

2009-03-24T08:19:00.000-07:00

Equitable interests in land - Justin Santiago

An equitable interest in land is pleaded when the aggrieved party has no legal interest in the land and is not the registered proprietor with absolute title. Such equitable interests can be claimed based on different situations and under various mechanisms such as express trust, resulting trust or constructive trust. An implied trust of land does not require it to be manifested and proved by some writing signed by the person able to declare the trust or thus circumventing LPA S53(1)(b) as allowed under LPA S53(2). Alternatively it could be possible to claim a contractual licence or an interest under a right of occupation.

Express Trust

A declaration of trust in respect of land or any interest therein must be manifested and proved by some writing signed by the person able to declare the trust or by his will satisfying the requirement of LPA S53(1)(b). Where there is an express declaration of a trust the parties are to hold as beneficial joint tenants : Goodman v Gallant and the parties would have an equal share in the property. However an express trust can also be inferred from a common intention that the house would be a matrimonial home : Paul v Constance.

Resulting Trust

If there was unequal contributions towards the purchase price of the house and if there is an absence of evidence of a different common intention an interest as a tenant in common with shares in proportion to the contribution under a resulting trust arises : Bull v Bull.

An interest under a resulting trust requires a direct contribution to the purchase price of the land made at the time of its acquisition by the person claiming the beneficial interest : Midland Bank v Cooke, Hammond v Mitchell. In Midland Bank v Cooke the courts held that in the absence of express agreements all conduct would be surveyed to throw light on what shares were intended. In Hammond v Mitchell the conduct surveyed included any promises of the interest to be had, any sharing of money, whether there was any detriment.

Constructive Trust

A beneficial interest may be claimed under a constructive trust which is the formula through which the conscience of equity finds expression : Beatty v Guggenheim Exploration Co. In Westdeutsche Landes-bank Girozentrale v Islington London Borough Council Lord Browne-Wilkinson identifed a constructive trust as a trust ‘which the law imposed on the trustee by reason of his unconscionable conduct’. In Paragon Finance v D B Thakerar & Co Millett LJ stated that a ‘constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his beneficial interest in the property’.

However limitations have been imposed on the constructive trust. Three conditions were laid out in in Grant v Edwards :-

a. Evidence of a common intention that the claimant should have a beneficial interest
b. The claimant has acted to his/her detriment on the basis of the common intention
c. Equitable fraud on the part of the legal interest holders

Further evidence of common intention are found in Lloyds Bank v Rosset :-

1. Evidence of agreement in the form of express discussions between the parties and
2. Evidence of conduct which includes direct contributions to the purchase price and payment of mortgage installments

It was intended by Lord Bridge that the value of the claimant’s share was to be determined by reference to the two categories of evidence. But the courts have adopted a more liberal approach, namely, once an interest has been established under at least one of the categories of evidence, the court has a general discretion to do what it considers just and fair in the circumstances.
The quantum of the beneficial interest is measured by reference to these contributions.

The courts are more likely to take a broad brush approach in determining the shares of the parties : Drake v Whipp. This was affirmed in Oxley and Hiscock where the courts considered that when two persons contributed to the purchase of land conveyed into the name of one of them and where there was no agreement about the quantification of their respective shares, the court was entitled to take into account the whole course of conduct between the parties in determining what would be a fair share. In the case of Le Foe v Le Foe, the courts showed a greater willingness to regard indirect contributions as triggering a share. This shows a return to earlier decisions by the courts in cases like Hussey v Palmer and Gissing v Gissing (pre Rosset) which showed flexibility in giving an interest to the party which made indirect contributions allowing the legal owner to make mortgage payments.

If an interest can be claimed under any of the three mechanisms above the interest would exist behind a trust of land (formerly trust for sale) governed by the Trusts of Land and Appointment of Trustees Act 1996. Under a trust of land a purchaser would have to pay to at least two trustees. If the money is paid to two trustees, the occupiers’ interests will be overreached even if they were in actual occupation : City of London Building Society v Flegg.

The nature of a beneficiary’s interest under a trust of land is such that they are neither registrable nor overriding under the LRA 2002. Such interests behind a trust of land are not capable of protection on the Register. A Restriction may be entered, forcing overreaching; but the Restriction does not protect the equitable interest and no Notice may be entered.

License

If the aggrieved party has no beneficial interest in the property the claimant only has a licensee which is a temporary occupation permit. If the claimant is a bare licensee he can be evicted with reasonable notice. However there is a possibility that he can claim a licence supported by a contract, by constructive trust, by estoppel or by a license coupled with an interest.

If by contract the aggrieved party should be able to prove all the elements of contract law – offer, acceptance, consideration, intention to create legal relations are met. A contractual license would give the claimant a right to stay on the land as a tenant for life and has been argued to amount to an interest in land : Errington v Errington Wood however this was declared per incuriam in Ashburn Anstalt v Arnold where it was stated that a contractual license could never amount to an interest in land following the traditional view of King v David Allen and Sons Billposting Ltd and Clore v Theatrical Properties Ltd where it was decided that a contractual licence cannot be a proprietary right and therefore cannot bind a third party even if he has notice. A contractual licence affects only parties who have entered into the agreement and should not be capable of binding third parties. The most that the agrieved party could claim was a breach of contract and therefore entitled to compensation for the loss of the expectation : Baker v Baker.

The other scenarios sees equity stepping in by way of a constructive trust to protect a licensee from third parties in cases where the purchaser was not bona fide : Binions v Evans. In this case a life tenancy was imposed by a constructive trust that would bind third parties. In this way the licences are becoming more difficult to distinguish from leases in terms of the rights which they confer upon the holder and has been applied equally to both unregistered land : Binions v Evans and registered land : Lyus v Prowsa Developments. The most striking case of a court treating a licence as effectively a property right is probably Bruton v London And Quadrant Housing Trust1977, where the House of Lords held that a lease could be granted out of a licence.

The third option is for the aggrieved party to claim a license arising out of estoppel and this would amount to an interest which would bind third parties and which can be protected by way of notice. Estoppel can be invoked if it can be coupled with a right that A may have which could be a rent free tenancy if there is continuous occupation : Greasley v Cook. He would have to prove that there was a representation made to him, there was reliance/change of position and there was detriment / unconscionable disadvantage. The question would be whether it would be conscionable to allow the sellers to insist on their strict legal rights : Taylor Fashions Ltd v Liverpool Victoria Trustees.

The purpose of the doctrine is to give rise to a number of remedies both proprietary and non proprietary and there is great flexibility in granting remedies to achieve such results as it thinks fair and reasonable in the circumstances. This could be a license to remain on the land : Inwards v Baker or even an interest in the land : Pascoe v Turner. However the particular interest to be awarded must still be decided by the judge according to all the circumstances of the case. It is difficult to find any consistent principle running through the cases. The modern approach to proprietary estoppel and how to give effect to the equity was considered in depth in the two following cases : Campbell v Griffin – repayment of any detriment incurred and Jennings v Rice – there must be proportionality between the expectation and the detriment.

As with the constructive trust, the inspiration behind proprietary estoppel can be seen in equity’s concern to prevent unconscionable conduct the difference is the central element for proprietary estoppel is detrimental reliance. However there are several differences between the two:-

1. The constructive trust has a long established use to impose a trust in situations unrelated to the principle of detrimental reliance

2. Secondly a constructive trust means by definition that a person has an equitable share in the property held by another. In a sense, the term “constructive trust” is used to describe both the legal mechanism by which a trust property is created but also the trust interest thus created. On the other hand, proprietary estoppel is a mechanism which if established may give rise to proprietary interests other than a trust.

A final option is for the aggrieved party to claim a license coupled with an interest and the licence exists to facilitate the enjoyment of the interest.

If it can be established that Olga has an interest either under enforceability of a contractual license by a constructive trust or an estoppel it would bind the buyer if it had been protected on the register or if it was supported by actual occupation as an interest that overrides under Schedule 3 Para II of the LRA 2002 (formerly S70(1)(g) which will protect Olga’s interest upon sale. If such cases any buyer or mortgagor would take the property subject to the aggreived party's interest unless it was not obvious that the aggrieved party was an occupier with reasonable inspection of the property.

Selling Land - Equitable Title and Legal Title

2009-03-24T07:58:00.000-07:00

Selling Land - Justin Santiago

Selling land requires two stages – a contract which transfers the equitable title followed by the transfer of legal title (conveyance).

Law of Property (Miscellaneous Provisions) Act 1989 S2 states that a contract for the sale or other disposition of an interest in land only transfers the equitable title and must fulfill 3 requirements “-

- it must be in writing
- it must incorporate all the terms in one document
- must be signed by or on behalf of each party to the contract

The next requirement is that the conveyances of a legal estate by way of sale must be by deed LPA S52(1) which transfers the legal title. Under the Law of Property (Miscellaneous Provisions) Act 1989 S1 - a deed is defined as a document which :-

- makes it clear on its face that it is a deed requires that the word ‘Deed’ appear on the document
- is signed and witnessed
- is delivered

Quotes

2009-03-24T03:38:00.000-07:00

No such thing as a constitution exists in England.
- Thomas Paine

The constitution is what the judge says it is
- Charles Evans Hughes, Former Chief Justice of the US Supreme Court

The Constitution of the United States is not a mere lawyers' document; it is a vehicle of life, and its spirit is always the spirit of the age.
- Nadia Boulanger

Our Constitution works. Our great republic is a government of laws, not of men.
- Gerald Rudolph Ford

A constitution is not the act of a government but of a people constituting a government and a government without a constitution is power without right.. A constitution is a thing antecedent to a government and a government is only the creature of a constitution.
- Thomas Paine – The Rights of Men

Constitutions have certain characteristics of which none can be found in the UK.
- F.F. Ridley - There is no British Constitution : A Dangerous Case of Emperor’s Clothes

If a constitution means a written document then obviously Great Britain has no constitution.
- Sir Ivor Jennings – The Law and Constitution

Be you ever so high, the law is above you
- Thomas Fuller

“When freedom does not have a purpose, when it does not wish to know anything about the rule of law engraved in the hearts of men and women, when it does not listen to the voice of conscience, it turns against humanity and society.”
- Pope John Paul II

“The court is most merciful when the accused is most rich”
- Hebrew Proverb

“Every law is an infraction of liberty.”
- Jeremy Bentham

Let there be no doubt, while I strongly disagree with the court's decision, I accept it.
- Al Gore on the U.S. Supreme Court decision on the 2000 presidential election, December 14, 2000

A government of laws, and not of men.
- John Adams

"Stretching the truth beyond its elasticity."

"The greater the fault of the servant, the less the liability of the master."

"Like putting a telescope to a blind eye."

"We can't look at the events of yesterday with today's spectacles."

"Those inflicted by hubris are visited by the goddess Nemesis."

Quotes - Jeremy Bentham

2009-03-24T03:24:00.000-07:00

“The power of the lawyer is in the uncertainty of the law”
- Jeremy Bentham

“Lawyers are the only persons in whom ignorance of the law is not punished.”
- Jeremy Bentham

“It is vain to talk of the interest of the community, without understanding what is the interest of the individual”
- Jeremy Bentham

“Nature has placed mankind under the government of two sovereign masters, pain and pleasure - they govern us in all we do, in all we say, in all we think: every effort we can make to throw off our subjection, will serve but to demonstrate and confirm”
- Jeremy Bentham

“Every law is an infraction of liberty.”
- Jeremy Bentham

“He who thinks and thinks for himself, will always have a claim to thanks; it is no matter whether it be right or wrong, so as it be explicit. If it is right, it will serve as a guide to direct; if wrong, as a beacon to warn.”
- Jeremy Bentham

“All punishment is mischief; all punishment in itself is evil.”
- Jeremy Bentham

Vocabulary Coach

2009-03-23T06:53:00.000-07:00

1. corollary - A consequence or result that can be logically drawn from the existence of a set of facts by the exercise of common sense and reason.

As a corollary of the shutting down of the factory, a number of workers are seeking compensation.

2. induction - Inference of a general law from particular instances.

Legal writers who begin paragraphs with a case name, who next describe the facts of the case and who only at the end apply the case to a theory or disputed argument are using the inductive method for delivering information.

3 .deduction - A tentative conclusion followed by supporting facts.

Using the deductive method, legal writers present the central idea at the beginning followed by the arguments.

4. spurious - Intended to deceive.

A man who tried to sue a local authority after he soiled his trousers has made it on to a list of the most spurious compensation claims. He blamed the accident on the closure of a bus station toilet and demanded the price of a new pair of trousers.

5. abjure - formally reject

He later made clear he was unaware of Bishop Williamson's views as a "Holocaust denier" and demanded that he abjure them.

6. promulgate - state/announce

The Himachal Pradesh Government is to promulgate an ordinance on ragging.

7. antecedent - preceding occurence

World War I was the antecedent to World War II.

8. Potemkin - having a false or deceptive appearance, esp. one presented for the purpose of propaganda

Many of Mr Obama’s achievements have a Potemkin quality.

9. Quo Vadis - "Where are you going?"

"Quo vadis,Zimbabwe?"

10. acolyte - one who follows

Stalin, Mao and Castro are said to be acolytes of Marx.

11. egregious - outstandingly bad; shocking

Egregious abuses of copyright.

12, innocuous - not harmful or offensive
It was an innocuous question.

13. serendipity - the occurrence and development of events by chance in a happy or beneficial way

A fortunate stroke of serendipity led to his happy marriage.

Registered Land

2009-03-23T00:16:00.000-07:00

How has LRA 2002 changed land law. Discuss. - Justin Santiago

The Land Registration Act 2002 was introduced in response to the Law Commission and HM Land Registry report, Land Registration for the Twenty-first Century (2001).The Act simplified and modernised the law of land registration. A key change under the new Act is that it is a move from a system of registration of title to one where the fact of registration itself gives a person title to the land. The act also facilitated the introduction of e-conveyancing and made the register reflect a more accurate picture of a title to land, showing more fully the rights and subsidiary interests that affect it.

The Act made some major changes to the law regulating registered land. Specifically, it:

1. Increased the list of events that force compulsory registration and voluntary registration;
2. Enabled shorter leases to be registered;
3. Changed the system of protection of third party rights; and
4. Provided for electronic conveyancing.

The increased list of events that force compulsory registration and voluntary registration would enable more land to come under registered title and reduce the volume of unregistered land conveyancing.

Compulsory registration - if a sale had been completed after 2003, according to LRA 2002 S4, any transfer of an unregistered freehold estate or a leasehold estate in land with more than seven years to run will be subject to compulsory registration. Transfer is broadly defined to include sale, gift, court order or the creation of a first legal mortgage. Originally under LRA 1925 registration of title was only compulsory on conveyance on sale of a fee simple and a grant of a lease for more than 21 years or assignment of a lease with more than 21 years to run.

Voluntary Registration

Under LRA 2002 S3 voluntary registration is encouraged for five types of legal estate which may be registered with their own title :-

1. Freehold
2. Legal lease with over seven years to run
3. Rent charge
4. Franchise (Right granted by the Crown)
5. Profit a prendre in gross

Protection of third party rights

The LRA 2002 attempted to more clearly reflect the true nature of the rights in the land concerned and to depend less on the doctrine of notice. Under registered land, the doctrine of notice supposedly did not have any application due to the fact that the system of registration is based on the mirror principle which reflects all the interests in the land. However there existed interests called overriding interests. Overriding interest loomed large in the scheme of LRA 1925 and although were not registrable protected rights of third parties representing a crack in the mirror and provided the most common pitfall for a purchaser of registered land and were listed in LRA 1925 section 70(1) and include the following 4 categories :-

- S70(1)(a) easements and profits including equitable easements
- S70(1)(f) rights of an adverse possessor
- S70(1)(g) rights of person in actual occupation – date of transfer of title : Abbey National BS v Cann
- S70(1)(k) leases granted for a term not exceeding 21 years

Under LRA2002, the role of overriding interests had been substantially reduced and was replaced by interests that override for which registration was strongly encouraged. Some interests that have been removed are equitable easement whether expressly or impliedly granted S70(1)(a) and the rights of adverse possessors unless accompanied by actual occupation S70(1)(f). The LRA 2002 also reduced the considerable burden to purchasers of the rights of persons in actual occupation under S70(1)(g) where :-

1. Enquiries have been made of the right-holder and he has failed to disclose the right in circumstances where he was reasonably expected to disclose and
2. The right holder’s actual occupation is not obvious on a reasonable inspection of the land and the person bound did not have actual knowledge of the interest

Under the new regime, there are two new categories of interest :-

Schedule 1- a broad category of interests which override on first registration of title that is will override the estate of the person who first registers when the land ceases to be unregistered land including :-

- leases up of to and including seven years
- the rights of occupiers – Schedule 3 Para 2
- easements and profits
- local land charges

Schedule 3 – a shorter list of interests which override on a later disposition of registered that is a sale of land after it has been registered :-

- leases up to and including seven years
- the rights of occupiers
- legal easements actually known to exist by the purchaser, obvious upon a reasonably careful inspection of the land or exercised within one year prior to the date of the disposition in question – overulling Celsteel v Alton
- profits

Section 71(b) imposes a duty for the person applying for registration of a disposition to disclose information about any rights of which he is aware which might fall within the scope of Schedule 3 and thus override. Protection by a notice on the register actually removes overriding status S29(3). Thus the number of overriding interests should be diminished as more dispositions are made under the new legislation with more interests coming onto the register.

Electronic Conveyancing

Electronic conveyancing is set out in Part 8 of LRA 2002 and provides for the conveyancing procedure to be carried out online. The act of creation will be the act of registration and this will be electronic.

The objective of electronic conveyancing is :-

1. A paperless system
2. No registration gap
3. A notional and viewable version of the register as amended to reflect proposed contractual terms
4. Draft documents verified against the title register and requisitions raised there and then as the transaction progresses
5. Quick identification of encumbrances
6. Possibility of simultaneous exchange of contracts or completion instantaneously

Problems

However problems still exists notably in the following areas :-

1. Interests in registered land may sometimes fall into one class and sometimes into another ex. someone with a interest that is neither registrable nor overriding is in actual occupation may protect his interest by entry on the register or rely on his occupation as entitling him to an overriding interest.

2. Interests that are neither registrable nor override allows the doctrine of notice to continue to apply in the case of registered land. These third type of interest formerly known as minor interests now termed third party rights which need to be protected by entry on the register comprising interests in unregistered land that would be registrable under the LCA and those that comprise interests of beneficiaries under trusts of land and strict settlements that were capable of being overreached under LRA 2002 S28-30. A new form of restriction will perform the functions of the current restriction and inhibition and a new form of notice will combine the functions of the current notice and caution. A restriction may be entered, forcing overreaching but the restriction does not protect the equitable interest and no notice may be entered.

2. Also short leases granted for period not exceeding seven years also bind any disponee of a registered and thereby detract, at least marginally, from the completeness of the mirror image which the Land Register is meant to reflect.

3. A periodic tenancy for less than 3 years is legal without a deed or document and is not registered anywhere.

4. A beneficial interest arising under a trust of land may bind a purchaser as an overriding interest even though it is not protected by entry on the register. A beneficial interest arising under a trust of land may be overreached if the purchaser pays to two trustees or a trust corporation whether they are in actual occupation or not. Thus a trust of land neither protects purchaser or interest holder and the LRA 2002 does not cater this type of situation adequately. Thus a person who has negligently failed to protect his interest is protected while the purchaser is bound to make much more extensive enquiries

5. The triggers for compulsory registration do not include a grant of a lease for exactly seven years and transfer of existing leases with less than 7 years left to run

6. Spouse’s right of occupation must be protected by entry on the register although a spouse may incidently have another interest which is capable of overriding the register such as a constructive trust interest.

Corporate Veil

2009-03-22T16:31:00.001-07:00

The ‘corporate veil’ refers to the separation of legal identity between parent firms and their subsidiaries, which gives the parent protection against the liabilities of its subsidiaries.

Law, Politics, Economics, Business

2009-03-22T15:54:00.000-07:00

Law is a system of standardized methods of conduct enforced through a set of institutions, used as an instrument to underpin civil obedience, politics, economics, business and society.

Politics is the process by which groups of people make decisions.

Economics is the study of production, distribution, and consumption of goods and services.

Business is an activity to provide goods and/or services to consumers, governments or other businesses.

The Law In Our Lives - Justin Santiago

2009-03-15T12:41:00.000-07:00

1. Wake up with a smile and think of the next 24 hours as a gift.
2. Plan the day ahead in one hour blocks and set goals and tasks.
3. Try and achieve a little every day for large projects that are ongoing.
4. Eliminate bad habits by replacing them with good habits.
5. Think of everyone else but yourself. You are already taken care of.

The Rule of Law

2009-03-14T20:15:00.000-07:00

Malaysia does not practice the Rule of Law. - Justin Santiago

The second precept of the Rule of Law states that there is equality before the law of all persons and classes. Malaysia does not practice the Rule of Law because it treats different people of different races and religions differently. So those who are given preferential treatment will ultimately consider themselves superior to those who are not given preferential treatment and maybe even above the law.

So long as Malaysia does not respect the Rule of Law, racism, dhimittude and similar behaviour patterns will continue to exist.

Historically, the most influential account of the rule of law was offered by A.V. Dicey. His formulation incorporated three ideas:

(1) the supremacy of regular law as opposed to arbitrary power;
(2) equality before the law of all persons and classes, including government officials; and,
(3) the incorporation of constitutional law as a binding part of the ordinary law of the land.

Legal Argument

2009-03-14T09:34:00.000-07:00

In a legal argument, you must always identify the area of law you are investigating, tell your reader what that law says, look at and interpret the relevant facts from your problem in relation to the law. Arrive at a conclusion of the situation when you have done this

What is the law

The next implied term that has been breached is fitness for purpose under section 71(2) of the Trade Practices Act. Second-hand goods such as the photocopier are generally expected to not be as fit as new goods (Atkinson v Hastings Deering (Qld) Pty Ltd [1985] ATPR 40-625). Also under this term the buyer must rely on seller's skill and judgement.

Interpret the relevant facts from the problem in relation to the law

Patricia described to the salesperson that she needed the photocopier for her business of copying theses, and asked whether it could do a number of specialised tasks. The salesperson said that it could do all this and more, Patricia relied on the salesperson's knowledge and therefore signed the contact (David Jones Ltd v Willis [1934] 52 CLR 110).

Conclusion of legal argument

However the photocopier was not fit for the purpose that Patricia described to the salesperson and she had to replace the lens and hire photocopier for 14 days.

Develop Your Voice

2009-03-13T08:46:00.000-07:00

One of the most convincing tools of a lawyer is his voice. If you speak with clarity and conviction you will have confidence in what you have to say and your clients will have confidence in you so let's get some tips from the pros on how to develop a great speaking voice.

The first video is entitled Deepen Your Voice. Actually its about how to give more body to your voice. It consists of exercises on how to develop a great speaking voice.

Secret Trusts

2009-03-08T16:00:00.000-07:00

Is there any coherent argument for the admission of non-conforming evidence in the case of secret trusts? - Justin Santiago

The law requires that for a disposition to be effective and that the equitable interest is assigned to the beneficiary it must be in writing according to S53(1)(c)of the Law of Property Act 1925. The Wills Act 1837 also only allows last wishes to be made in writing, signed by the testator and signed by two people who have witnessed the testator's signature formally.

Secret trusts involve making an oral declaration without the details being made public save only to the person who is asked to put into effect those wishes. In the case of fully secret trusts there is no trust at all because for all intents and purposes it is an absolute gift to the legatee.

Apart from not fulfilling the written requirement, secret trusts also bypass very fundamental trust requirements such as the requirement for imperative words, evidence of acknowledgement by the trustee of the terms of the trusts and the trustee also being the beneficiary :-

Trusts need to consist of imperative words and have objects that are certain.

In the case of half secret trusts the trust consists of precatory words and also is not clear on the objects.

Trusts must be manifested by means of an acknowledgement that the trustee be bound by the terms of the trust : Ottoway v Norman. In the case of both fully secret and half secret trusts there is no evidence of acknowledgement that the secret trustee by bound by the terms of the trust.

In the case of fully secret trusts because the secret trustee is the beneficiary there is a wide scope for fraud as the trustee could claim that he would take of the gift absolutely.

Several justifications for allowing secret trusts have been put argued by several theories in defence of secret trusts such as the fraud theory and the dehors the will theory to justify their justify their admission. However it seems that these theories are mainly used to the testator to make such a disposition as he or she pleases without the details being made public as in the case of transfer of property to a mistress or an illegitimate child. Two theories which are frequently cite are the fraud theory and the dehors the will theory :-

The Fraud Theory

The fraud theory states that secret trusts would be enforced by a court of equity in favour of a secret beneficiary on grounds that equity will not permit a statute to be used as an instrument of fraud. The fraud theory supposes that the purpose of the fraud would either be for the trustee to take the gift absolutely for his personal gain and to deny the secret beneficiary or to disappoint the wishes of the settler (expanded fraud theory : Blackwell v Blackwell).

The Dehors (Outside) the Will Theory

The dehors the will theory states that the the secret trust operates outside the testator’s will and should not be regarded as testamentory trusts at all. This is exemplified by the rule that in probate law is that the will does not take effect until the testator's death. Therefore, if a named beneficiary is not alive at that time, his estate is not entitled to anything. However, in Re Gardner, the secret beneficiary's estate was held to be entitled to the deceased beneficiary's interest under the half-secret trust. This supports the view that the trust comes into existence `dehors the will', but does not explain when the trust was constituted. In any case, this decision is out of line with normal probate rules.

There is a further third theoretical justification that the doctrine of secret trusts is part of the law on incorporation by reference which states that a document can be incorporated into a will by being referenced in the will, but only if the document exists at the time the will is executed. However secret trusts is about oral testimony and hence this theory has been rejected.

Private Purpose Trusts and Unincorporated Associations

2009-03-06T00:49:00.000-08:00

No principle has perhaps greater sanction of authority behind it than the general proposition that a trust by English law, not being a charitable trust, in order to be effective, must have ascertained beneficiaries – per Lord Evershed MR in re Endacott. How accurately does this statement represent the present law relating to the dedication of property to private purposes? - Justin Santiago

The requirement of ascertained beneficiaries fulfills one the certainty objects test and thus would go towards validating the trust. A private purpose trust fails to indicate an individual or individuals or a clear class of individuals who will benefit if it is carried out. For example re Astor – a trust for inter alia the establishment, maintenance and improvement of good understanding, sympathy and co-operation between nations was held void.

The rationale is that such trusts lack enforceability against the trustees and flouts the beneficiary principle inherent in all trusts. The beneficiary principle requires that all trusts be made for the benefit of human beneficiaries who will be able to apply to the court to enforce the trust : Morice v Bishop of Durham – the court can neither reform maladministration nor direct a due administration. The principle is also framed as the ‘no purpose trust’ rule and that with the exception of charitable trusts, nearly all trusts for a purpose are void : re Endacott – a testamentary trust for the purpose of providing some good useful memorial to myself failed for want of a human beneficiary

The beneficiary principle can be viewed as a rights principle or an enforcer principle. If there are no persons with rights against the trustee then there is no trust. It also follows that if there is no one with the ability to enforce the trust then there is also no trust. The law of trusts are devices of private law and for a private law to have any legal effect it must actually confer rights or create enforceable duties. Dedicating rights to a purpose does neither.

A number of purpose trusts have been upheld despite infringing the beneficiary principle, and also despite infringing the rule against perpetuities :-

1.Reasonable provision for tombs and monuments provided it was specifically to erect a physical structure

2.The upkeep of animals : re Dean with the rationale that the courts were sympathetic with the specific motive of the testator and it was unclear whether the trust was for the animal per se or to a person who helped to look after the animals : Pettingall v Pettingall – under such situations the trustee or executor of the will undertakes to carry out the purpose of the trust – “Petingall” order

3.Religious services to the extent that these are not charitable in advancement of religion : Bourne v Keane, re Hetherington – the element of community benefit.

The rationale to allow these private purpose trusts was that the purposes were beneficial and it was reasonably possible to execute through a Pettingall order which would be issued by the courts under which the trustee or executor of the will undertakes to carry out the purpose.

With regard to a gift to an unincorporated association which is a group of individuals who combine to act together to achieve some purpose, often social. Because the society is not incorporated, unlike a limited company, it has no legal personality in itself and so cannot hold rights in the way that a corporation can. Unlike a corporation, an unincorporated association has no rights or duties separate from those undertaken by its individual members. Contrast this with, for example, a limitedCompany, which is an corporation and has a distict legal personality. A limited company can sue and be sued in its own name, and enter into contracts.

Because it is not a legal entity, individual members of an association are responsible for their actions, even if carried out on behalf of the association.
However, if an association appoints a committee to act on its behalf, that committee may be jointly liable for the actions of one of its members. In addition, in legal proceedings an association may appoint someone to represent the association, and that appointment will normally be accepted by the courts.

Gifts to or in trust for unincorporated associations, excluding charities, create difficulties in terms of ownership of the property and enforceability of the trust.
The validity of gifts to unincorporated associations varies with the construction that the court may place on the gift. The approach of the court was summarised by Cross J in Neville Estates Ltd v Madden [1962] Ch 832, in three propositions.

Cross J. “In the first place, it may, on its true construction, be a gift to the members of the association at the relevant date as joint tenants, so that any member can sever his share and claim it whether or not he continues to be a member of the association – this however may not however be the intention of the donor - Leahy v AG for New South Wales – as a non charitable gift, the trust failed as the testator’s intentions was clearly to create an endowment for the order of nuns (both present and future) and not for the benefit of ndividuals.

Secondly, it may be a gift to the existing members not as joint tenants. A member cannot sever his share, it would accrue to other members on his death or resignation, even though other members could seek to restrain him by injunction or seek to restrain him by injunction or proceed against him for breach of contract. This approach is to resort to contractual notions rather than the device of the trust based on the duties and obligations between members and the association which amount to contractual obligations. According to Conservative Central Office v Burrell 1982, the members of the association must have mutual obligations to one another, which suggests that there is some form of contractual relationship between them. the members are bound by the contractual relationship between them to use the property to the associations's purposes. As such the gifts and other transfers to such associations are construed as being transfers to the members themselves but subject to their contractual obligations between themselves to use the rights so given to promote the purposes of the association : re Lipinski’s Will Trusts : a purpose that is within the powers of the association and of which the members of the association are beneficiaries should not fail.

Thirdly, the terms or circumstances of the gift or the rules of the association may show that the property in question is not to be at the disposal of the members for the time being, but is to be held in trust for or applied for the purposes of the association as a quasi-corporate entity. Since an unincorporated association promotes a purpose, a gift to such an association in one sense may not be enforced because there is no person (donee) capable of giving a valid receipt for the property or it may be difficult to identify a person who is capable of enforcing the trust : Re Astor. Such an approach is disastrous for the transferor because it would generally invalidate the transfer as a private purpose trust, unless the purposes were exclusively charitable or of a type falling under the principle enunciated in re Denley’s Trust Deed .

In this case, a trust for the maintenance of a sports ground (a purpose) for use by the employees of a company was valid on the ground that the purpose was not of such an abstract kind as to fall foul of the beneficiary principle and the employees had locus standi to ensure that the trustees put the purpose into effect. There are however views that suggest that this was merely a form of a trust for persons with the purpose being treated as merely a superadded direction or motive for the gift.

Alternatively a gift to an association can be seen as a mandate to an officer of the association to disburse the gift in a particular way. As mandates are (by definition) revocable when initially created, there must be some point at which the mandate to the association becomes irrevocable. The most logical view seems to be that this takes place when the property of the gift is disbursed.

Re Horley Town Football Club; Hunt v McLaren [2006] - In 1948 Major Jennings, the president of Horley Football Club (the Club) settled land by deed on trust to secure a permanent sports ground for the Club. In May 2002 the land was sold to a developer for almost £4m. The trustees used the proceeds to purchase another site for £850,000 and to construct a Club house and ancillary facilities amounting to approximately £2.2m. This new sports complex was subject to certain restrictive covenants which limited its use to sports and leisure. As a consequence the land was worth less than the amount spent on it. The rules of the Club made provisions for several varieties of membership ranging from the current full members to temporary and associate members. The claimants (trustees) applied to the court for directions concerning the basis on which they held the assets of the Club and the proper construction of the rules of the Club.

The High Court decided as follows:

(a) a gift to or in trust for an unincorporated association might take effect as a gift to the existing members, not as joint tenants, but subject to their respective contractual rights and liabilities towards each other as members of the association. In this event the member could not sever his share and it would accrue to the other members on his death or resignation. Such members include persons who became members after the gift took effect.

(b) The deed of 1948 was construed as a gift to the members of the Club as a contract-holding gift to the Club and its members including subsequent members. On this construction, the gift will fail if it is not limited in perpetuity

(c) The beneficial ownership of the assets of the Club was in the subsisting full members, but not the temporary and associate members. The trustees of the Club held the assets on bare trust for the full members

(d) The members acquired the assets of the Club subject to the current rules and could unanimously or by a general meeting call for the assets to be transferred.

Disbursal of assets of the dissolution of the association

In the present case, Collins J. after considering the principles in the above mentioned cases decided that the trust deed will be construed as a gift to the Club as a ‘contract-holding’ gift to the Club and its members. He also decided that the beneficial ownership of the assets of the Club was vested in the current full members of the Club on a bare trust. In addition, a clause will be implied into the rules of the Club to the effect that the surplus funds of the club on a dissolution should be divided amongst its members at the time of dissolution on a per capita basis, irrespective of the length of membership or subscriptions paid.

A common problem concerning unincorporated associations is the distribution of their assets when they are dissolved. Where the assets are contributed by the individual members the problem is not particularly acute, but there are particular difficulties where the assets are funds that have been raised by public subscription : Re West Sussex Constabulary Widows Fund 1971. The prevailing view is that there is no obligation to return these funds to their contributors, but in Air Jamaica v Charlton 1999 Lord Millet stated that such a return should be effected where the number of contributors was small and readily ascertainable.

Charitable Trusts

2009-03-06T00:33:00.000-08:00

What are the approaches taken to determine whether a proposed trust, which appears to provide for a novel purpose not found to be charitable or uncharitable by a previous judicial decision is charitable? Are any reforms of the law indicated? - Justin Santiago

The question refers to the fourth category of charitable trusts called trusts for other analogous purposes within the spirit and intendment of the Preamble to the Statute of Charitable Uses 1601 which was distilled by Lord Mcnaghten in the case of Commissioners of Income Tax v Pemsel. This fourth category allowed for charitable trusts other than those outlined in the first three categories outlined in the preamble namely trusts for the relief of poverty, trusts for the advancement of religion and trusts for the advancement of education.

This fourth category of trusts includes a purpose which confers a benefit on the public Incorporated Council for Law Reporting Society v AG and which must be wholly and exclusively chartable.

Beneficial to the community would mean that a charitable trust must have a sufficient element of public benefit in order to attain charitable status i.e. it must not be confined to a small section of the population Neville Estates v Madden and there must be no denying any element of public participation in the purpose : Oppenheim v Tobacco Securities Trust Co 1951. Oppenheim is generally taken to have decided (at least for educational trusts) that a public purpose trust cannot exist where there is a “personal nexus” between the donor and the beneficiaries.

The exclusively charitable requirement was outlined in Inland Revenue Commissioners v City of Glasgow Police Athletic Association [1953] 1 All ER 747, the House of Lords decided that a gift to the City of Glasgow Police Athletic Association was not charitable on the grounds the charitable purpose namely, improving the efficiency of the Police Force, was purely incidental to the non-charitable purpose of providing recreational activities for members of the force.

For the fourth category it is not enough simply to show that the purpose confers a benefit on the public – inherent in the purpose that it is beneficial to the community – it must also be shown to be a charitable trust – AG v National Provincial and Union Bank of England – it must be analogous to purposes which are found in the Preamble : Williams v IRC. The approach of the courts is to treat the examples as stated in the preamble as a means of guidance in deciding on the validity of the relevant purpose. Two approaches have been adopted by the courts namely;-

1. Reasoning by analogy : the approach here is to ascertain whether a purpose has some resemblance to an example as stated in the preamble or to an earlier decided case which was considered charitable : Scottish Burial Reform and Cremation Society v City of Glasgow Corporation : provision of a crematorium was considered charitable by analogy with the repair of churches as stated in the preamble.

2. The spirit and intendment of the preamble : this approach is much wider than the previous approach. The courts decide if the purpose of the organization is within the spirit and intendment or within the equity of the statute unhindered by the specific purposes as stated in the preamble : Incorporated Council of Law Reporting v AG - if a purpose is shown to be beneficial to the community per se this should be enough to guarantee charitable status unless some positive harm or unwanted effect can be proven this is the public benefit approach – tainted by politics McGovern v AG.

3. Beneficial to the community would mean that a charitable trust must have a sufficient element of public benefit in order to attain charitable status i.e. it must not be confined to a small section of the population or be so limited by the stipulations of the testator as to deny an element of public participation in the purpose. Although the limitation on the class of persons who may derive a benefit from the charity does not destroy the public character of the trust, a second or third limitation may well make it so difficult for the public at large to qualify for the charitable benefit that there is no real public benefit at all : IRC v Baddeley. In Dingle v Turner (1972) a trust to benefit a company's poorer employees was held to be charitable, despite the strong, but much criticised message of Oppenheim v Tobacco Securities Trust Co 1951. Oppenheim is generally taken to have decided (at least for educational trusts) that a public purpose trust cannot exist where there is a “personal nexus” between the donor and the beneficiaries which confirmed the test in Re Compton which stated that lacking the essential element of public benefit if the potential class of persons likely to benefit are united by a common personal bond.

4. Reference to the identification of the objects as exclusively charitable. In Inland Revenue Commissioners v City of Glasgow Police Athletic Association [1953] 1 All ER 747, the House of Lords decided that a gift to the City of Glasgow Police Athletic Association was not charitable on the ground that the trust funds were capable of being devoted for both charitable and non-charitable purposes. The charitable purpose namely, improving the efficiency of the Police Force, was purely incidental to the non-charitable purpose of providing recreational activities for members of the Force. Lord Normand declared:

The Charities Act 2006 although not providing a statutory definition of charity has attempted to reform the law on charities and extended the fourfold categorization in Pemsel to 12 though some of this is little more than a codification of earlier decisions on the fourth head including advancement of advancement of amateur sports, advancement of human rights – McGovern v AG, advancement of animal welfare, citizen and community development – Williams v IRC and expanded on the category of religion to include belief in more than one god and religion which does not involve belief in a god and the retention even the expansion of the analogy approach. However the definition of charity in S1(1) is still not clear and the public benefit test requirement although included under S3 of the act is still not properly defined. Section 3(3) consolidates the case law meaning of public benefit. This involves a two step test of demonstrating a benefit to society (as mentioned above) and that those eligible to receive benefits must comprise a large enough group to be considered as the public and without a personal or private relationship being used to limit those who may benefit.

The Charities Act 2006 attempted to resolve the public benefit test requirement. Section 3(3) consolidates the case law meaning of public benefit. This involves a two step test of demonstrating a benefit to society (as mentioned above) and that those eligible to receive benefits must comprise a large enough group to be considered as the public and without a personal or private relationship being used to limit those who may benefit.

Ultimately courts will interpret charitable trusts rather broadly because charitable trusts are regarded as beneficial to society as a whole and as such can bypass the beneficiary principle and avoid conformity with the certainty of objects requirement. This is because in the case of charitable trusts there need not be a named beneficiary. Attorney General may take an action on behalf of the Crown. Charity is regarded in law as indivisible, irrespective of the actual group or body carrying out the purpose. As such it would not be contrary for money to be permanently dedicated to charitable purposes and will not fail.

Charitable trusts can defeat the rule against perpetuities - may be of unlimited duration.

Can defeat the rule against remoteness of vesting which will allows the court to order a gift over from one charity to another if the original charity should fail and be used for purposes as near as possible to the original purposes under the rules of cy-pres – re Lysaght, re Farakar.

May enjoy substantial fiscal advantages in the form of reduction or exemption from various taxes and charges.

Declaration and Disposition

2009-03-03T22:29:00.000-08:00

Many attempts have been made to avoid the action of s.53(1)(b) and s.53(1)(c). - Justin Santiago

The sections of the LPA 1925 refer to written evidence required in a declaration of a trust and disposition of an equitable interest respectively. The avoidance of these two sections is to avoid these two requirements in order not to pay stamp duty which is required when a beneficial interest is transfered to the beneficiaries. Anyone who wants to avoid paying stamp duty will want to avoid using a document to create or transfer a trust. Most attempts to do this have failed. The courts take a dim view of over-enthusiastic tax avoidance, and the lack of precision of the term “disposition” has allowed them to give effect to that view. Arguments about whether it is possible to come up with a way to defeat s.53 to the satisfaction of a judge are now moot - stamp duty is generally only payable on land transactions, and it's almost impossible to do anything with land these days unless it is in writing.

S53(1)(b) states that a declaration of a trust of interests in land must be manifested and proved by some writing and signed by some person who is able to declare a trust. This statue is based on S7 of the Statute of Frauds 1677 which requires written proof of a declaration of a trust. The writing must be signed by the settlor (or the testator in the case of the will). Signature by an agent is not permitted. The written requirement does not have to be on the date itself it is merely a confirmation of a declaration of trust that happened before. The trust would still operate from the date it was declared. The general view is that Section 53(1)(b) is merely an evidential requirement provided the matter came to court rather than substantive in nature. Non-compliance with the provision would merely render the trust unenforceable although it will be perfectly valid. It is possible for there to be a joinder of documents in order to fulfil the requirements of the subsection. Constructive trusts and resulting however are specifically exempted from formality requirements according to S53(2) outflanking the rule in S53(1)(b).

However the effect of S60(3) LPA 1925 which states that “In a voluntary conveyance a resulting trust for the grantor shall not be implied merely by reason that the property is not expressed to be conveyed for the use or benefit of the grantee”. This is of course contradictory to Russel LJ’s reasoning obiter in Hodgson v Marks that a trust that fails for want of formality is saved by an automatic resulting trust. This reasoning is of course false because there is nothing automatic.

In the case of Rochefoucold v Bousted, the COA held that an oral declaration could be allowed based on the equitable maxim a statute cannot be used as an instrument of fraud and the court is entitled to suspend the operation of the statutory requirement of evidence in writing. It is important to see whether there was any point of a fraud being committed and to show that the party being promised to acted to his detriment or significantly altered his position as proof that there was an oral declaration that would vest the equitable title to him. Alternatively the extended fraud theory can be invoked in order to create a half secret trust which can be allowed as an exception.

T.G. Youdan in his article "Formalities for Trusts of Land and the Doctrine in Rochefoucauld v Boustead" has argued that the third party beneficiary should be entitled to enforce the trust – whether or not the settlor is dead – under the Rochefoucauld doctrine as well as in half secret trusts.

S53(1)(c) states that disposition (not creation) of an existing equitable interest (not legal title) subsisting (must be in existence) at the time of the disposition must be in writing not merely proved by writing for it to be assigned (transferred) to third parties. The underlying policy was to :-

a. prevent fraud by prohibiting oral hidden transfers of equitable interests under trusts and
b. assist trustees by enabling them to identify the whereabouts of the equitable interest subsisting under a trust

This requirement was recognised much earlier under S9 of the Statute of Frauds 1677 which stipulated that all grants and assignments of any trust must be in writing otherwise it will be void and have no effect.

It has been established that the written requirement in S53(1)(c) LPA 1925 applies to personalty as well as to realty despite the definition of ‘equitable interests’ in s205(1)(x) of the Law of Property Act 1925 which refers to equitable interests in the context of land.

Grey v IRC is thought to be the authority for the proposition that a written document is required if the beneficiary of a trust instructs the trustees to hold the trust property for different beneficiaries. The rationale is that the divesting part of the transaction which results in the destruction of the original beneficiary’s interest must be regarded as a disposition. This is also consistent with S205 which states that a disposition includes a conveyance and conveyance includes a release.

In Vandervell v IRC where National Provincial Bank held the legal title to shares on behalf of Mr Vandervell were orally directed by Mr Vandervell to transfer the legal title of the shares to the Royal College of Surgeons and made it clear that he wanted to transfer his own beneficial interest it was held that this was a valid disposition because it was outside the S53(1)(c). Lord Upjohn in this case empasised the fact that the shares had been transferred by writing and that further writing under S53(1)(c) was therefore superfluous. The proposition was that no writing is required if the beneficiary instructs the trustees to transfer the legal title to the trust property out of the trust altogether.

If the beneficiaries assign the interests, the assignment is similar to contract and S53(1)(c) would apply

If the beneficiaries contract to assign the interests, this is not a disposition and S53(1)(c) would not apply : Oughtred v IRC. Here, shares in a trust fund were held on trust for Mrs O for life and then for her son. Mrs O held other shares of which she was the absolute owner. She agreed to transfer these to her son and he agreed to release his interest under the other shares to her. In order to do this three documents were executed: a transfer of the second shares to the son; a deed of release to the trustees who held the first shares; and a deed of transfer by the trustees of the first shares to Mrs O. Thus there was no document transferring the son’s interest to Mrs O and it was argued that no stamp duty was payable. This argument failed in the House of Lords, where it was held that the son’s equitable interest must have passed under the transfer of the legal estate by the trustees. This can be explained upon the basis that the transfer of the legal estate by the trustees amounted to a disposition of the equitable interest, which transfer would have to be in writing pursuant to Section 53 (1) (c). Later decisions suggest that an equitable interest can pass under a contract without any formality but it should be noted that the point does not appear to have been fully argued in some cases. See Re Holt’s Settlement and DHN Food Distributors Ltd v Tower Hamlets London Borough Council.

The question did arise in the recent case of Neville v Wilson where the CA decided that an informal agreement relating to the liquidation of a company and the division of the company’s equitable interest in the shares of another company was not rendered ineffective by S.53 of the Law of Property Act 1925. Each shareholder’s agreement to the liquidation created an implied or constructive trust for the other shareholders. This decision would seem to confirm that an equitable interest can pass under a contract without any formality. As soon as a contract is formed, the assignor holds the equitable interest on constructive trust for the assignee, and s.53(2) states that s.53(1) does not apply to constructive trusts. This decision endorsed the dissenting argument by Lord Radcliffe in Oughtred v IRC where he stated that a constructive trust would have to be created to prevent unjust enrichment.

In the case of a bare sub trust the beneficiary is now a mere conduit between the trustee and the sub beneficiary and therefore drops out of the picture and this is in truth a disposition and must follow S53(1)(c) as explained by Battersby and strenghtned by the operation of the rule in Grainge v Wilberforce.

Summary

1. Declaration of new trust not an outright transfer – S53(1)(c) does not apply - Re Vandervell No. 2

2. Beneficiary instructs the trustees to transfer the legal title to the trust property out of the trust altogether to a new beneficiary. The old trust collapses and the beneficiary drops out. The new beneficiary also receives the equitable interest and becomes the new settlor. S53(1)(c) does not apply – Re Vandervell

3. Change trustee – S53(1)(c) does not apply

4. Declaration of bare sub trust – S53(1)(c) applies

5. Declaration of a sub trust – S53(1)(c) does not apply because the old trust collapses and a new trust is created - Grainge v Wilberforce

6. Where an equitable interest is disclaimed – this occurred in Re Paradise Motor Co Ltd where the Court of Appeal held that a disclaimer did not amount to a disposition under Section 53 (1) (c)

7. Nomination of a beneficiary under a pension fund or a life assurance
policy. In Re Danish Bacon Co Staff Pension Fund Trusts Megarry J took the view that the nomination of a beneficiary under a staff pension fund was not a testamentary disposition and neither did it fall within the ambit of s.53(1)(c). He stated that even if it did fall within the statutory provision, the formalities could be satisfied by two connecting documents. In Gold v Hill, the first claimant was named as a beneficiary under the life assurance policy of Gilbert. The first claimant alleged that, before his departure to Nigeria, Gilbert informed him of this fact and asked him to look after Gilbert’s wife and children if anything should happen to him, Gilbert. Gilbert died and a dispute arose as to the nomination. The claimants claimed that the nomination was valid. The defendant,who was the solicitor and executor of Gilbert’s will, alleged that the nomination created an equitable interest in favour of Gilbert and the instruction to the first claimant had the effect of disposing the equitable interest contrary to s.53(1)(c) of the LPA 1925. It was decided that the nomination did not transfer or create any interest until death and it was sufficient that the nature of the trust was communicated before death. There was sufficient communication of the terms of the trust to the first claimant. Further, prior to the death of Gilbert, there was no subsisting equitable interest which could be disposed of. Accordingly, there had been no attempt to dispose of an existing equitable interest contrary to s.53(1)(c).

References

T.G. Youdan Formalities for Trusts of Land and the Doctrine in Rochefoucauld v Boustead

Graham Battersby Formalities for the disposition of equitable interests under a trust

Constitution of a Trust

2009-03-03T22:22:00.000-08:00

Every inter vivos gift must comply with the complete and perfect requirement. - Justin Santiago

The complete and perfect requirement refers to constituting a trust which is vesting of the rights which form the subject matter of the trust in the intended trustee. Once it is constituted the beneficiaries of the trust can enforce it against the trustee. A gift will fail if the giver can not, or does not, take the appropriate steps to divest himself of the legal title.

How is a trust constituted?

a. Title to land which is unregistered – execution of deed – S52LPA1925, S2LP(MP) 1989
b. Title to land which is registered – trustee will be registered as the proprietor
c. Chattels - conveyed by either deed or delivery
d. Shares - executed an instrument of transfer of shares in the form required by the company’s articles and registered with the company SS182, S183 Companies Act 1985 and Stock Transfer Act 1963
e. Chose in action – S136 LPA 1925
f. Equitable interests – S53(1)(c) LPA 1925

The general rule about constituting a gift is found in Milroy v Lord - equity will not assist a volunteer to perfect an imperfect gift consistent with the inability to enforce gratuitous promises promises not supported by consideration under common law.

Historically there have been only two ways to create a trust. Either:
(1) the intending settlor declared the trusts and actually transferred the assets to the trustees (or did everything in his power, according to the nature of the property, to transfer the property to the trustees); or
(2) he constitutes the trust with himself as the trustee of the property.

Milroy v Lord holds that an imperfect attempt to create a trust using a third party as trustee will not be interpreted as a declaration by the settlor himself as trustee. The argument here is that there must be an expression of intention to become a trustee which is different from an intention to give over property to another : Richards v Delbridge.

Courts have frequently been called upon to exercise their equitable discretion, and rescue a gift that has failed for some reason or other and will not intervene to create one for him except in the following situations which would result in a constructive trust :-

Exceptions to the rule in Milroy v Lord

1. Detrimental Reliance – if it can be shown that there was a representation, reliance, detriment then proprietary estoppel will step in to order the perfection of the imperfect gift/trust from the moment the assurance is given : Dillwyn v Llewelyn, Pascoe v Turner.

The purported transferor will hold the promised right on constructive trust for the intended donee. However it could be argued that in the alternative the donor could be compelled to make good the donee’s loss (compensation) or to give up his own gain (restitution).

2. Re Rose - there was a defect in the share transfer process –everything has been done to transfer the legal title and this is a question of fact. If so then the gift is effective despite the lack of a valid transfer of title. The legal sleight-of-hand that makes the Re Rose principle work is that, once the donor is committed to transfer the legal title, he is deemed to hold the legal title on constructive trust for the recipient. However for a constructive trust to apply there must be a requirement of ‘unconscionability’. In Pennington v Waine where the donor had manifested an immediate and irrevocable intention to donate shares to another and had instructed her agent to execute the transfer, the donor was not be permitted to deny the interest acquired by the donee even though there was no unconscionability on the part of the donor but the courts felt it would be unconscionable on the part of the donee to be denied his interest as argued by Abigail Dogget in her article "Explaining Re Rose : The Search Goes On". This is a worrying trend since it would complicate the maxim that equity will not assist a volunteer and turn it into equity will not assist a volunteer only if it was not unconscionable.

3. Donatio Mortis Causa or Death Must Cure- conditions for the operation of the rule found in Cain v Moon although not complying with the Wills Act 1837 :-

a. Gifts must be in contemplation of the owner’s death “settled, hopeless, expectation”' of (relatively imminent) death, even if there has not been an adequate transfer of legal title : Re Craven’s Estate.
b. Donor must intend for gift to go back to him if death does not occur – similar to a bare trust situation
c. The gift has to be physically passed on

4. The rule in Strong v Bird - when a testator makes his debtor the executor the debt is automatically released although not made by deed and was merely a bare promise not to sue however this is balanced by the intention to relieve the debt and the intention continued until the testatrix death

5. The rule in Re Ralli’s WT- unperformed promise by deed to give had not been performed during the lifetime of the promisor – enough to constitute the covenanted for trust by virtue of being appointed executor of the promisor’s will

6. The rule in Choithram v Pagarani

Choithram v Pagarani set up a foundation and transferred the legal title to the foundation which is different from vesting the trustees with the legal title.

- it was argued that the foundation does not exist in English law and and that the legal title was not transferred and therefore the trust failed
- however the counter argument were the words “ I give to the foundation” could only mean “I give to the trustees of the foundation trust deed to be held by them”
- however the settlor himself being a trustee and the settlor vesting the legal title in himself puts the situation squarely in the middle of the two historical methods of creating a trust which is for the settlor to declare himself as trustee or to vest the legal title to a trustee

Referencea

Abigail Dogget Explaining Re Rose : The Search Goes On
Judith Morris When is an invalid gift valid?

Substantive Requirements of a Trust

2009-03-03T20:18:00.000-08:00

What are the the requirements to create an enforceable trust? - Justin Santiago

1. Substantive Requirements i.e. - 3 certainties - certainty of intention, certainty of subject matter, certainty of objects.

a. Certainty of intention

Whether there was certainty of intention is a question of fact, not a question of law. If the test for certainty of intention fails, there cannot be a valid trust, and the person to whom the property is transferred becomes the legal and beneficial owner.

The test of certainty of intention is "Can the words be construed as having the effect on the trustee’s conscience? Christian LJ in McCormick v Grogan.

The use of the word “wish” can be construed as being precatory i.e. exhibiting a desire which only has the effect that the trustee acts according to his conscience which would merely amount to an allegation of a trust : Re Adams & Kensington Vestry.

Also the word “trust” does not necessarily imply a trust in the legal sense. For example, in Tito v Waddell the words “held in trust for” did not mean that a certain legal obligation was to be imposed. Where certainty of intention is evidenced by conduct, the conduct must manifest a clear intention to deal with the trust property in the form of a trust Re Kayford 1975 although, again, no reference need be made specifically to a trust

The modern approach does not look at words alone to determine an intention but conduct as well. It is not necessary that the settlor used the word “trust”', nor even that he knew what a trust was, provided the intention is clear. For example, in Paul v Constance 1976 the words “This money is a much yours as mine”, combined with the behaviour of the settlor, were held to be sufficient to find that a trust had been created.

Was the intention to transfer rights? Failed attempts to transfer rights cannot be construed as a self declaration of a trust – Richards v Delbridge.

If the court cannot distinguish between an intention to benefit another and an intention to create a trust, then the result is that neither of these outcomes will obtain, and the property will remain with the settlor : Jones v Lock.

b.Certainty of subject matter - there are two limbs to certainty of subject matter in order to ensure that there is holding of rights on behalf of another :-

i) the trust property must be certain
ii) the beneficial interest must be defined/ascertainable

Failure of a trust where relative words are employed in defining the property for example – a gift by a testatrix of “the bulk: of her residuary estate : Palmer v Simmonds and Re Kolb which concerned a direction to hold “blue chip securities” on trust. Also Anthony v Donges where the testator directed that his widow receive such minimal part of the estate as she might be entitled under English law was void for uncertainty.

Consequences of inability to identify trust rights would result in the recepient taking the rights outright : Palmer v Simonds the rationale is that the uncertainty as to subject matter feeds back into uncertainty as to intention to create a trust in the first place.

Note however the trend of courts to not take the too literal approach in Re Golay with regard to a trust to pay a reasonable income to a named beneficiary.

c.Certainty of objects

The beneficiary principle requires that all trusts be made for the benefit of human beneficiaries who will be able to apply to the court to enforce the trust : Morice v Bishop of Durham. The principle is also framed as the ‘no purpose trust’ rule and that with the exception of charitable trusts, nearly all trusts for a purpose are void : re Endacott – a testamentary trust for the purpose of providing some good useful memorial to myself failed for want of a human beneficiary

The beneficiary principle can be viewed as a rights principle or an enforcer principle – re Astor’s Settlement Trusts. If there are no persons with rights against the trustee then there is no trust. It also follows that if there is no one with the ability to enforce the trust then there is also no trust. The law of trusts are devices of private law and for a private law to have any legal effect it must actually confer rights or create enforceable duties. Dedicating rights to a purpose does neither.

However whether the conferring of rights creates the enforceable duty is unclear as it may be possible for the settlor to nominate someone else to serve as the enforcer of those beneficiaries’ rights. In Re Denley, a trust for the maintenance of a sports ground (a purpose) for use by the employees of a company was valid on the ground that the purpose was not of such an abstract kind as to fall foul of the beneficiary principle and the employees had locus standi to ensure that the trustees put the purpose into effect.

Law of Trusts - Basics

2009-03-03T18:38:00.000-08:00

What is Trust Law? - Justin Santiago

The law of trusts deal with trusts, an equitable device used by the settlor to split the rights over his or her money or property into legal and equitable rights. The legal rights are held by the trustee on behalf of the beneficiary who holds the equitable rights (the right to enjoy the benefits of the money or property).

The equitable rights created by the trust enables the beneficiary to enforce the trust in his own name, although he was not a party to the original agreement evading the doctrine of privity. This is why the trust is only recognised by equity not the common law which requires the doctrine of privity in any agreement.

In Westdeutsche Landesbank Girozentrale v Islington Borough Council, Lord Browne-Wilkinson, conveniently identified the relevant principles of trust law which can be summarised as follows:

(i) equity operates on the conscience of the owner of the legal interest;
(ii) the owner of the legal interest cannot be a trustee of the trust property until aware of the facts alleged to affect his conscience;
(iii) in order to establish a trust there must be identifiable trust property (
(iv) once the trust is established, a trust beneficiary has an equitable proprietary interest in the trust property enforceable against subsequent holders other than the bona fide purchaser of the legal interest.

Rights which the settlor had prior to the creation of the trust are vested in their entirety in the trustee. But he is not free to use those rights for his own benefit in the way he could if no trust existed. At the same time new rights are created in the beneficiary of the trust, which enables him to hold the trustee to account for his exercise of those rights : DKLR Holding Co (No 2) Ltd v Commissioner of Stamp Duties.

It should be noted that if, at any time, the full legal title and equitable title are held by a single individual, a merger has happened, which means the titles have fully merged such that the individual has full ownership of the property and the trust is over. The beneficiaries are also entitled to terminate the trust by directing the trustees to transfer the legal title to them, provided that they have attained the age of majority and are mentally sound.

A settler can declare himself trustee of property for someone (settler and trustee can be the same person), a settler can also convey property to a trustee on trust for himself (settler and beneficiary can be the same person). A trustee can also be one of several beneficiaries. A beneficiary can declare a trust of the equitable title which is called a sub-trust.

Express trusts are a species of trusts that have been created specifically and are associated with the traditional meaning of a trust. An express trust is created when a settlor effectively exercises his powers of ownership to do so. A power is the capacity to change or create rights, duties or other powers. An express trust can be testamentary which is set out in a person’s will or it can be inter vivos which is created by the settlor when alive.

An express trust has to fulfill the substantive requirements, be properly constituted, adhere to the formalites and there must be a valid disposition.

There are variations of express trusts :-

Sub trust - a beneficiary may create a trust of his interest in favour of another. In this situation the original beneficiary adopts the role of the settler and trustee for the benefit of another.

Trust of a promise – a legal fiction designed to make a promise between 2 parties the subject matter of a trust for the benefit of a 3rd party which can enforce the promise – Les Affreteurs Reunis v Walford. The courts have undermined the device by insisting upon strict proof of an intention to create a trust of a promise – Re Schebsman.

A bare trust - when the trustee holds property for a beneficiary on no specific trust terms but to do as the beneficiary dictates. Bare trustees are often called nominees. Most common example of a trust of this kind is the trust upon which a solicitor holds his client’s purchase moneys prior to completion of the sale of land.

There are trusts which arise through the courts :-

Statutory Trust – legislature has thought it convenient to use the trust device as a cure for certain problems. If I attempt to convey a title to land to Fred and Joe as tenants in common, statute provides that the effect of my action is to convey the title to Fred and Joe as joint tenants on trust for themselves as tenants in common : S34(2) LPA 1925.

There are also trusts that arise by operation of the law namely constructive and resulting trusts :-

Constructive Trust – a trust constructed by the court rather than by the individual right holder. An example is Aluminium Industrie Vaasen B.V. v Romalpa Aluminium Ltd n the case of reservation of title clauses sellers retain equitable title and to make the company to which the goods were supplied a trustee of the goods until the seller has been fully paid.

Resulting Trust – any situation in which A conveys rights to B which B for whetever reason then holds on trust for A.

Trust Maxims

2009-03-01T22:39:00.000-08:00

Trust Maxims - Justin Santiago

•1 Equity regards as done that which ought to be done.
•2 Equity will not suffer a wrong to be without a remedy
•3 Equity delights in equality
•4 One who seeks equity must do equity
•5 Equity aids the vigilant, not those who slumber on their rights
•6 Equity imputes an intent to fulfill an obligation
•7 Equity acts in personam.
•8 Equity abhors a forfeiture
•9 Equity does not require an idle gesture
•10 One who comes into equity must come with clean hands
•11 Equity delights to do justice and not by halves
•12 Equity will take jurisdiction to avoid a multiplicity of suits
•13 Equity follows the law
•14 Equity will not aid a volunteer
•15 Between equal equities the law will prevail
•16 Between equal equities the first in order of time shall prevail
•17 Equity will not complete an imperfect gift
•18 Equity will not allow a statute to be used as a cloak for fraud
•19 Equity will not allow a trust to fail for want of a trustee

1. Equity regards as done that which ought to be done.
Problems may sometimes arise because, through some lapse or omission, cover is not in force at the time a claim is made. If the policyholder has clearly been at fault in this connection, because, for example, he has not paid premiums when he should have, then it will normally be quite reasonable for an insurer to decline to meet the claim. However, it gets more difficult if the policyholder is no more at fault than the insurer. The fair solution in the circumstances may be arrived at by applying the principle that equity regards that as done which ought to be done [See para 1, above]. In other words, what would the position have been if what should have been done had been done?
Thus, in one case, premiums on a life policy were overdue. The insurer' s letter to the policyholder warning him of this fact was never received by the policyholder, who died shortly after the policy consequently lapsed. It was clear that if the notice had been received by the policyholder, he or his wife would have taken steps to ensure the policy continued in force, because the policyholder was terminally ill at the time and the cover provided by the policy was something his wife was plainly going to require in the foreseeable future. Since the policyholder would have been fully entitled to pay the outstanding premium at that stage, regardless of his physical condition, the insurer (with some persuasion from the Bureau) agreed that the matter should be dealt with as if the policyholder had done so. In other words, his widow was entitled to the sum assured less the outstanding premium. In other similar cases, however, it has not been possible to follow the same principle because there has not been sufficiently clear evidence that the policy would have been renewed.
Another illustration of the application of this equitable principle was in connection with motor insurance. A policyholder was provided with cover on the basis that she was entitled to a ' no claims' discount from her previous insurer. Confirmation to this effect from the previous insurer was required. When that was not forthcoming, her cover was cancelled by the brokers who had issued the initial cover note. This was done without reference to the insurer concerned, whose normal practice in such circumstances would have been to maintain cover, but to require payment of the full premium until proof of the no claims discount was forthcoming. Such proof was eventually obtained by the policyholder, but only after she had been involved in an accident after the cancellation by the brokers of the policy. Here again, the fair outcome was to look at what would have happened if the insurer's normal practice had been followed. In such circumstances, the policyholder would plainly have still had a policy at the time of the accident. The insurer itself had not acted incorrectly at any stage. However, in the circumstances, it was equitable for it to meet the claim.

2. Equity will not suffer a wrong to be without a remedy
When seeking an equitable relief, the stronger hand is that which has been wronged. The stronger hand is that hand which has the capacity to ask for a remedy. In equity, this form of remedy is usually one of Specific Performance or an Injunction. These are superior remedies to those which are administered at common law such as damages.

3. Equity delights in equality
Where two persons have an equal right, the property will be divided equally. Thus Equity will presume joint owners to be tenants in common unless the parties have expressly agreed otherwise. Equity also favours partition, if requested, of jointly-held property.

4. One who seeks equity must do equity
In order to receive some equitable relief, the party must be willing to complete all of their own obligations as well. Moreover, the defense of "unclean hands" lies whenever the conduct of a plaintiff in equity has been iniquitous. Snidely Whiplash would not be tossed out of a court of law, but his equity suits would almost certainly turn out badly.

5. Equity aids the vigilant, not those who slumber on their rights
Vigilantibus non dormientibus aequitas subvenit.
Once the party knows they have been wronged, they must act relatively swiftly to preserve their rights.
Equity favours the vigilant, and those who "sleep on their rights" may be deprived of equitable remedies. This maxim is often displaced by statutory limitations, but even where a limitation period has not yet run, equity may apply the doctrine of "laches", an equitable term used to describe delay sufficient to defeat an equitable claim.
Alternatives:
•Delay defeats equity
•Equity Aids the Vigilant, Not Those Who Sleep on Their Rights

6. Equity imputes an intent to fulfill an obligation
Generally speaking, near performance of a general obligation will be treated as sufficient unless the law requires perfect performance, such as in the exercise of an option. Text writers give an example of a debtor leaving a legacy to his creditor equal or greater to his obligation. Equity regards such a gift as performance of the obligation so the creditor cannot claim both the legacy and payment of the debt.

7. Equity acts in personam.
Basically, the act is against the person, and not their property in rem.
Equity asserts jurisdiction over the person of the defendant, and enforces its orders against him or her by contempt or other means.

8. Equity abhors a forfeiture
Today, a mortgagor refers to his interest in the property as his "equity." The origin of the concept, however, was actually a mirror-image of the current practice. At common law, a mortgage was a conveyance of the property, with a condition subsequent, that if the grantor paid the secured indebteness to the grantee on or before a date certain (the "law" day) then the conveyance would be void, otherwise to remain in full force and effect. As was inevitable, debtors would be unable to pay on the law day, and if they tendered the debt after the time had passed, the creditor owed no duty to give the land back. So then the debtor would run to the court of equity, plead that there was an unconscionable forfeiture about to occur, and beg the court to grant an equitable decree requiring the lender to surrender the property upon payment of the secured debt with interest to date. And the equity courts granted these petitions quite regularly and often without regard for the amount of time that had lapsed since the law day had passed. The lender could interpose a defense of laches, saying that so much time had gone by (and so much improvement and betterment had taken place) that it would be inequitable to require undoing the finality of the mortgage conveyance. Other defenses, including equitable estoppel, were used to bar redemption as well. This unsettling system had a negative impact on the willingness of lenders to accept real estate as collateral security for loans. Since a lender could not re-sell the property until it had been in uncontested possession for years, or unless it could show changed circumstances, the value of real estate collateral was significantly impaired. Impaired, that is, until lawyers concocted the bill of foreclosure, whereby a mortgagee could request a decree that unless the mortgagor paid the debt by a date certain (and after the law date set in the mortgage), the mortgagor would thereafter be barred and foreclosed of all right, title and equity of redemption in and to the mortgaged premises. To complete the circle, one needs to understand that when a mortgagor fails to pay an installment when due, and the mortgagee accelerates the mortgage, requiring immediate repayment of the entire mortgage indebtedness, the mortgagor does not have a right to pay the past-due installment(s) and have the mortgage reinstated. In Graf v. Hope Building Corp., 254 NY 1 (1930), the New York Court of Appeals observed that in such a case, there was no forfeiture, only the operation of a clause fair on its face, to which the mortgagor had freely assented. In the latter 20th Century, New York's lower courts eroded the Graf doctrine to such a degree that it appears that it is no longer the law, and that a court of conscience has the power to mandate that a default be excused if it is equitable to do so. Of course, now that the pendulum is swinging in the opposite direction, we can expect courts to explain where the limits on the newly-expanded equity of redemption lie...and it is probably not a coincidence that the cases that have eroded Graf v. Hope Building Corp. have been accompanied by the rise of arbitration as a means for enforcing mortgages. See, generally, Osborne, Real Estate Finance Law (West, 1979), Chapter 7.

9. Equity does not require an idle gesture
Also: Equity will not compel a court to do a vain and useless thing. It would be an idle gesture for the court to grant reformation of a contract and then to deny to the prevailing party an opportunity to perform it as modified.

10. One who comes into equity must come with clean hands
For example, if you desire your tenant to vacate, you must have not violated the tenant's rights.
For instance, in Riggs v. Palmer (1889) 115 N.Y. 506, a man who had killed his grandfather to receive his inheritance quicker (and for fear that his grandfather may change his will) lost all right(s) to the inheritance.
IN D&C Builders v. Rees (1966) a small building firm did some work on the house of a couple named Rees. The bill came to 732 pounds, of which the Rees had already paid 250 pounds. When the builders asked for the balance of 482 pounds, the Rees announced that the work was defective, and they were only prepared to pay 300 pounds. As the builders were in serious financial difficulties (as the Rees knew), they reluctantly accepted the 300 pounds 'in completion of the account'. The decision to accept the money would not normally be binding in contract law, and afterwards the builders sued the Rees for the outstanding amount. The Rees claimed that the court should apply the doctrine of equitable estoppel, which can make promises binding when they would normally not be. However, Lord Denning refused to apply the doctrine, on the grounds that the Rees had taken unfair advantage of the builders' financial difficulties, and therefore had not come 'with clean hands'.

11. Equity delights to do justice and not by halves
When a court of equity is presented with a good claim to equitable relief, and it is clear that the plaintiff also sustained monetary damages, the court of equity has jurisdiction to render legal relief, e.g., monetary damages. Hence equity does not stop at granting equitable relief, but goes on to render a full and complete collection of remedies.

12. Equity will take jurisdiction to avoid a multiplicity of suits
Thus, "where a court of equity has all the parties before it, it will adjudicate upon all of the rights of the parties connected with the subject matter of the action, so as to avoid a multiplicity of suits." Burnworth v. Hughes, 670 P.2d 917, 922 (Kan. 1983). This is the basis for the procedures of interpleader and the more rarely used bill of peace.

13. Equity follows the law
Equity will not allow a remedy that is contrary to law. The court of Chancery never claimed to override the courts of common law. In story on equity 3rd English ed. 1920 pg.34,"where a rule, either of the common or the statute law is direct, and governs the case with all its circumstances, or the particular pint, a court of equity is a much bound by it as a court of law, and can as little justify a departure from it." it is only when there is some important circumstance disregarded by the common law rules that equity interferes. as per Cardozo C.J in Graf v. hope building corporation, 254 N.Y 1 at 9 (1930)

14. Equity will not aid a volunteer
Basically, the person involved in the action must have a real interest in the issue. Equity will not assist if the common law requirements for a gift are not met. The exception is if the doctrine of estoppel applies.
This maxim is similar to equity will not complete an imperfect gift.

15. Between equal equities the law will prevail
Equity will provide no specific remedies where the parties are equal, or where neither has been wronged.

16. Between equal equities the first in order of time shall prevail
This maxim operates where there are two or more competing interests, one legal and the other equitable. Where the claims of both parties are fair and meritorious, precedence will be given to the legal interest. This maxim was developed in connection with interests in lands. When a purchaser acquires property bona fide without notice of a defect in the vendor’s title, the equities are equal and the legal estate will prevail. If the purchaser takes title with notice of the defect, the earlier title, if valid, will prevail. The force of this maxim has largely been displaced by legislated systems of land title registration. Goes back to the Earl of Oxford Case.

17. Equity will not complete an imperfect gift
If a donor has made an imperfect gift, ie lacking the formalities required at common law, equity will not assist the intended donee. A subset of equity will not assist a volunteer.
Note the exception in Strong v Bird (1874) LR 18 Eq 315. If the donor appoints the intended donee as executor of his/her will, and the donor subsequently dies, equity will perfect the imperfect gift.

18. Equity will not allow a statute to be used as a cloak for fraud

19. Equity will not allow a trust to fail for want of a trustee

Occupier's Liability

2009-02-27T00:51:00.000-08:00

If the courts were to take a very broad view of what the occupier `ought reasonably' to protect against, the occupier would be liable simply on the basis that both the trespasser and the danger were reasonably forseeable. - Justin Santiago

The law governing the duty owed by an occupier to a trespasser was left unaltered by the 1957 Act. Historically there was no duty owed to a trespasser and was only liable if it could be proved that he had done some act intending to harm the trespasser or with reckless disregard for the trespasser’s safety – Robert Addie & Sons v Dumdreck. This was altered in BRB v Herrington where it was held that trespassers were owed the common duty of humanity.

Under the Occupiers Liability Act 1984 – S1(1)(a) duty is owed by an occupier to persons other than visitors, in respect of injury on the premises by reason of any danger due to the state of the premises or things done or omitted to be done on them

A duty arises if three separate conditions are satisfied S1(3) :-

a. he is aware of the danger and has reasonable grounds to believe that it exists
b. he knows or has reasonable grounds to believe that the other is in the vicinity of the danger concerned or that he may come into the vicinity of the danger and
c. the risk is one which in all the circumstances of the case, he may reasonably be expected to offer the other some protection

Standard of care S1(4) - owes a duty to take such care as is reasonable in all the circumstances of the case to see that the trespasser does not suffer injury on the premises by reason of the danger concerned – what constitutes reasonable care will vary according to the circumstances

The duty owed may be discharged when warning of a danger is given S1(5)

If the courts were to take a very broad view of what the occupier `ought reasonably' to protect against, the occupier will be liable simply on the basis that both the trespasser and the danger were reasonably forseeable. This reasoning led to concerns that the 1984 Act represented a “trespasser's charter”. The House Of Lords decision in Tomlinson v Congleton Borough Council 2003 was therefore broadly welcomed as a reintroduction of common sense. The central theme of the Lords' ruling is that the cause of the claimant's injury was his own folly, not something that the defendants did or failed to do. The danger of the lake was obvious, and the authority had erected signs to that effect, and had directed its park staff to eject people from the lake if they were found there. There could be no dount that the claimant had known of the danger, and that he must therefore have been deemed to have accepted it voluntarily.

Two points brought up by Lord Hoffman : the first is the social value of the activities which would have to be prohibited in order to reduce or eliminate the risk from swimming. And the second is the question of whether the council should be entitled to allow people of full capacity to decide for themselves whether to take the risk.

Social Value

The Court of Appeal made no reference at all to the social value of the activities which were to be prohibited. The majority of people who went to the beaches to sunbathe, paddle and play with their children were enjoying themselves in a way which gave them pleasure and caused no risk to themselves or anyone else. This must be something to be taken into account in deciding whether it was reasonable to expect the council to prevent people from using the beaches or to deprive people form using the beach in a harmless way.

Free will

The second consideration, namely the question of whether people should accept responsibility for the risks they choose to run, is the point made by Lord Phillips of Worth Matravers MR in Donoghue v Folkestone Properties Ltd[2003] QB 1008, 1024, para 53 :

Mr Tomlinson was freely and voluntarily undertaking an activity which inherently involved some risk. By contrast, Miss Bessie Stone (Bolton v Stone [1951] AC 850), to whom the House of Lords held that no duty was owed, was innocently standing on the pavement outside her garden gate at 10 Beckenham Road, Cheetham when she was struck by a ball hit for six out of the Cheetham Cricket Club ground. She was certainly not engaging in any activity which involved an inherent risk of such injury.

I think it will be extremely rare for an occupier of land to be under a duty to prevent people from taking risks which are inherent in the activities they freely choose to undertake upon the land. If people want to climb mountains, go hang-gliding or swim or dive in ponds or lakes, that is their affair. Of course the landowner may for his own reasons wish to prohibit such activities. He may be think that they are a danger or inconvenience to himself or others. Or he may take a paternalist view and prefer people not to undertake risky activities on his land. He is entitled to impose such conditions, as the Council did by prohibiting swimming. But the law does not require him to do so.

My Lords, as will be clear from what I have just said, I think that there is an important question of freedom at stake. It is unjust that the harmless recreation of responsible parents and children with buckets and spades on the beaches should be prohibited in order to comply with what is thought to be a legal duty to safeguard irresponsible visitors against dangers which are perfectly obvious. The fact that such people take no notice of warnings cannot create a duty to take other steps to protect them. I find it difficult to express with appropriate moderation my disagreement with the proposition of Sedley LJ, ante, p 62B-C, para 45, that it is "only where the risk is so obvious that the occupier can safely assume that nobody will take it that there will be no liability". A duty to protect against obvious risks or self-inflicted harm exists only in cases in which there is no genuine and informed choice, as in the case of employees whose work requires them to take the risk, or some lack of capacity, such as the inability of children to recognise danger (Herrington v British Railways Board [1972] AC 877) or the despair of prisoners which may lead them to inflict injury on themselves: Reeves v Comr of Police of the Metropolis [2000] 1 AC 360.

So this appeal gives your Lordships the opportunity to say clearly that local authorities and other occupiers of land are ordinarily under no duty to incur such social and financial costs to protect a minority (or even a majority) against obvious dangers. On the other hand, if the decision of the Court of Appeal were left standing, every such occupier would feel obliged to take similar defensive measures.

Two other differences should be noted between the duty of care to lawful visitors and that to trespassers. First, the 1984 Act only applies to personal injury. The 1957 Act is not so limited. This means that, in effect, the occupier carries no liability for damage to a trespasser's property, however expensive. Secondly, the 1957 Act allows that a visitor may waive his protection under the Act by a clear disclaimer, subject to the provisions of the Unfair Contract Terms Act 1977. The 1984Act makes no such statement. It is not entirely clear why a person is allowed to waive his responsibility to lawful visitors, but not to trespassers. It could be that, in practice, the 1977 Act would prevent any effective waiver anyway. Alternatively, the duty of care to a trespasser is so low that it would unjust to allow the occupier to lower it still further by a disclaimer. Another argument is that, while it would be possible to get a lawful visitor to express his agreement to the terms of a disclaimer, it is not clear how one would get a trespasser to do so.

Vicarious Liability

2009-02-26T17:59:00.000-08:00

Vicarious liability runs counter to two principles of the law of tort, namely that a person should only be liable for loss or damage caused by his own acts of omissions and secondly that a person should only be liabile when he has been at fault. Discuss.

Vicarious liability is one person’s liability for another’s act/omission which caused loss to another. An example of vicarious liability is the liability of an employer for acts by his or her employee. The burden of the liability on the employer is justified because the employer derives economic benefit so needs to bear any losses/liability incurred and it is justifiable to impose liability as he has substantially greater means and may have the necessary insurance to cover such contingencies.

Employers are vicariously liable, under the respondeat superior doctrine, for negligent acts or omissions by their employees in the course of employment.However there has to be a balance between firstly furnishing an innocent victim with recourse and secondly hesitation to foist undue burden on business enterprises.
For an act to be considered within the course of employment it must either be authorised or be so connected with an authorised act that it can be considered a mode, though an improper mode, of performing it.

Various tests have been formulated in order that this balance is achieved.

An employee has to be clearly defined under a contract of service as opposed to contract for service.Under the control test formulated in Yemen v Noakes an employee is one who is subject to the command of his master as to the manner in which he shall do his work. This test was further elaborated in Ready Mixed Concrete v Minister of Pensions which said a contract of service exists if these three conditions are fulfilled.

(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. The wage represents the consideration and if there is no consideration there is no contract of any other kind.

(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. However, it was also made clear in the judgment that, although a right of control is an important factor in determining employment status, it is not necessarily a determining factor.

(iii) The other provisions of the contract are consistent with its being a contract of service. Factors such as ownership of significant assets, financial risk and the opportunity to profit are not consistent with a contract of service.

The "Salmond Test" is used to determine if an act of an employee occurred in the course of employment and, therefore, whether the employer should be liable. This test deems an act to have been committed in the course of employment if it is either:

(a) something authorised by his employer, or
(b) an unauthorised mode of doing something authorised.

The second limb of the Salmond Test is particularly difficult to apply and the House of Lords in the U.K. has recently expressed its preference for a less technical test which was followed by the Court of Final Appeal. This new test focuses on whether the employee's act is so closely connected with his employment that it would be fair and just to hold his employer vicariously liable (Lister v Hesley Hall Limited [2002] 1 AC 215).

Ultimately, the focus of the "close connection" test is still whether or not the act of the employee in question is carried out in the course of employment. However, in determining this point, the "close connection" test appears to allow a broader and more flexible examination of the facts and circumstances of a particular employment as the court does not have to determine if the act in question is authorised, whether expressly or impliedly. The law was deemed mature enough to hold an employee vicariously liable for deliberate, criminal wrongdoing on the part of an employee overruling Trotman v North Yorkshire.

To avoid vicarious liability, an employer must demonstrate that the employee was acting in his own right rather than on the employer's business. Factors to take into consideration whether it was a frolic or detour : Joel v Morrison, fow own benefit, whether it was wholly independent act, or was it incidental to employment or was it a prohibited conduct : Rose v Plenty.

CIF, FOB

2009-02-23T22:25:00.000-08:00

The nature of a cif contract remains unclear. Discuss. - Justin Santiago

The discussion revolves around whether a CIF contract is a sale of goods or a sale of documents pertaining to the goods or both. A CIF contract is a cost, insurance and freight contract. Under a CIF contract the seller is required to arrange the carriage of the goods and their insurance in transit, and the cost of those arrangements is included in the contract price. The seller obtains a bill of lading and a policy of insurance and forwards them to the buyer, together with an invoice for the price, and the buyer pays on receipt of the documents.

It has been argued that a CIF contract is a sale of documents in the lower courts in the case of Arnold Karberg v Blythe, Green, Jourdain and Co by Scrutton, J who said the contract was a sale of documents based on the fact goods can be paid for or sold on the strength of the documents. Support for Scrutton, J's judgement comes from the fact that a number of legal rights and liabilities are attached to the documents such as the buyer's obligation to pay against the tender of the documents or the right to reject the goods against a bad tender of documents.

However the correct definition of a CIF contract was later addressed in the same case at the level of the Court of Appeal and reiterated in Hindley & Co v East India Produce Co where it was stated that it was the contract of the sale of goods to be performed by the delivery of documents. The case of Kwei Tek Chao v British Traders it was stated there were 2 rights of rejection – rejection of documents and rejection of goods emphasised the point that two conditions needed to be fulfileed and that a cif contract meant both a sale of documents or a sale of goods. Additionally this rule is subject to the proviso that the documents tendered are strictly in conformity with the contract i.e. the goods correspond with the description.

Some cases will illustrate the duality of this definition. In Gill and Dufus v Berger – normal duty of the buyer to pay the price against the documents even though the seller has failed to perform his duty to ship conforming goods.
The rationale is that it is the buyer who will take benefit of insurance and eliminates difficult questions of proof of the actual time when the goods were lost/damaged. This is an exception to the provision on the allocation of risk is Section 20(1) in SOGA which states, "Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not."

The buyer is also protected in cases where it is physically impossible to deliver the goods. In cases like Manbre Sacharin where the goods did not exist or were destroyed before the passing of documents, the contract was invalid.

In contrast to a CIF contract, in an FOB contract, S20 of the Sale of Goods Act 1979 is applied and risk prima facie passes with property so that risk normally passes to the buyer when the goods are put across the ship’s rail – Pyrene v Scindia - the tender was at the sellers risk when it was dropped during loading prior to crossing the ship’s rail.

Risk of loss may also remain with the seller by virtue of he provisions of s32 of the Sale of Goods Act. Section 32 (3) provides that:

“where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give to the buyer such notice as will enable the buyer to insure them during the sea transit”

If the seller fails to supply such information, the goods are at his risk during the sea transit. It has been argued that s32(3) can have no application to FOB sales because the contract requires the seller to deliver the goods “free on board” and delivery to a carrier is normally deemed to be delivery to he buyer.

In the alternative, risk may pass to the buyer prior to shipment. In Cunningham v Munro it was suggested that if the goods deteriorate because of the buyer’s delay in giving the seller shipping instructions (it is the obligation of the buyer to nominate an effective vessel and nominate the port of loading) or because the buyer induces the seller to deliver goods to the port before the goods can be loaded the buyer would be liable for such deterioration; he would be entitled to reject the goods for non-compliance with the implied conditions as to quality in the Sale of Goods Act, but would be liable to the seller in damages for the deterioration.

Risk may also remain with the seller under the following circumstances :-

1.Seller has reserved the right of disposal by retaining the bill of lading
2.Contract goods are unascertained

The Rule in Rylands v Fletcher

2009-02-22T22:52:00.001-08:00

The rule in Rylands v Fletcher should be abolished and absorbed within negligence or alternatively should be generously applied and the scope of strict liability extended. Discuss. - Justin Santiago

The principle of the decision in Rylands v Fletcher was expressed in the famous words of Blackburne J:

“The person who brings on his land for his own purposes, and collects and keeps there, anything liable to do mischief if it escapes, must keep it in at his peril...”'

The rule in Rylands v Fletcher applied the doctrine of strict liability into the tort and the primary justification for this was premised upon the belief that the rights of individuals should not be sacrificed in the furtherance of the public interest in cases where the acts were "one off" and therefor difficult to be liable under nuisance which requires the acts to be continuous or where it was difficult to prove that the defendant had not taken all reasonable precautions to prevent the mischief since the escape would not have been foreseeable.

The application of strict liability, that is, liability without fault is contentious because it looks at the harmful result rather than to the kind of conduct. This is very different from the traditional fault-based formulation in negligence.

However, the situation is quite a lot more complicated than it first appears, because true strict liability would be extremely burdensome. Consequently, the courts, just like in the law of nuisance, have imported fault elements into the rule in other guises. To succeed in the rule under Rylands v Fletcher, the claimant has to show that the defendant's activities amounts to a `non-natural' user of land. Clearly this will be easier if the defendant's activities are inherently unreasonable. In addition, it appears that a remoteness test applies to this tort as it does for nuisance.

In Cambridge Water v Eastern Counties Leather 1994, the House held that the concept of `non-natural user' was a valid one, and what the defendants had been engaged in did constitute a non-natural use; nevertheless, the same tests for remoteness as applied in negligence also applied to the rule. The loss suffered by the claimants was not of a type forseeable by the defendants, and the damage was therefore too remote. Under strict liability it would not matter whether the loss was foreseeable or not. So, even if the defendant's activities amount to `unreasonable user', he may still escape liability if he could not reasonably be expected to foresee the type of damage that would result.

In short, Ryands v Fletcher is not subject to an explicit test for fault as negligence is, but it has features which at least overlap with a test for fault. The main procedural difference is that the claimant does not have the burden of proving that the defendant was at fault - this is assessed by the court with regard to the reasonable user and remoteness considerations.

Whether this warrants that the rule be absorbed into negligence is debatable because under negligence there would be several more elements that may be difficult to prove by the claimants who would be deprived of the right to use their land. The rule itself, said the House of Lords in Transco v Stockport MBC, fulfilled an important social objective, in making people think very carefully about the ways they used their land.

Nuisance

2009-02-22T22:52:00.000-08:00

There continues to be uncertainties about the basis for suing under private nuisance - Justin Santiago

There has been a preference to sue under private nuisance because it is not based on fault and therefor is less difficult to prove. Private nuisance is the continuous, unlawful and indirect interference with a person’s use or enjoyment of land or some rights over or in connection with it and as long as all these elements are present there is a valid case. However several cases have pointed to the limitations of this definition that makes it difficult to start an action under nuisance.

Because private nuisance is a tort against land, not against the person only those with rights to the land namely an interest in land or exclusive possession can sue.
It has never really been clear what amounts to a proprietary interest in land for the purposes of nuisance, and on closer inspection it is obvious that it isn't a particular helpful concept in general – Pemberton v Southwark LBC 2000 decided that a tenant, who had reverted to being a trespasser by his non-payment of rent, but was tolerated by the landowner, had standing to sue in nuisance.

In Khorasandjian v Bush the law of nuisance could be invoked by those who had a substantial link to the land, and this would include the relatives of landowners however Hunter v Canary Wharf reinstated the proprietary interest principle stated in Malone v Laskey that the claimants must have an interest in the land and must have exclusive possession tin their own right and overturned the decision to allow occupiers with a substantial link to the landowner to sue.

Although Hunter seems clear enough, there continue to be uncertainties about who has a right to sue in nuisance. The first problem arises from those cases where the courts have accepted that it is a nuisance to prevent someone getting access to land (rather than interfering with his use of that land). These cases have mostly arisen out of the actions of pickets on industrial disputes. In both Thomas v NUM [1986] Ch 20 and Newsgroup v SOGAT [1987] ICR 187 the courts accepted that pickets caused a nuisance by preventing non-striking workers getting into their places of work. In none of these cases had the victim of the nuisance had any proprietary interest in land; at best they were licencees. However, unlike Malone, these cases concerned rights of access to land, not right of enjoyment of land, and might represent a different species of nuisance.

Limiting who can sue to those with rights to land is contrary to Article 8 of the European Convention on Human Rights which demands respect for private and family life, and if a person occupies his home as a licencee, or even as a trespasser, it seems that he should still be able to get the protection of the Article.

Another contentious point is the requirement for the interference to be continuous which is said to distinguish nuisance from negligence which can be based on a single event. In British Celanese v Hunt Capacitors 1969, the defendant's metal foil blew onto a power line and shut off power to the claimant's plant. This was a single event, but the defendants were liable. The reasoning was that the single event followed from an ongoing state of affairs (the inadequate storage of the foil). Then, in Leakey v National Trust 1980, the defendants were held liable for a (single) landslide onto the claimant's property. Again, the reasoning was that the defendant's land was defective, and had been so for a long time.

Additionally in deciding nuisance cases, the courts have to balance the right of the claimant to use his land, with the right of the defendant to use his. Not every trivial interference will amount to a nuisance. It must be a balancing exercise between rights of the claimant and other householders : Miller v Jackson. Factors to take into consideration :-

- defendant’s conduct in light of the circumstances
- nature of the locality – Sturges v Bridgman making a disruptive amount
of noise is more likely to be unreasonable in a quiet rural area than in
an industrial zone
- abnormal sensitivity – Robinson v Kilvert
- malicious – Christie v Davey, Holleywood Silver Fox Farm v Emmet 1936, the defendant's shooting was perfectly lawful, and would not
have amounted to a nuisance had it not been done with malice.
- does not normally occur
- occurs at an unreasonable time
- objectives could have accomplished in a less intrusive manner
- dangerous
- natural nuisance recognised and the same duty of positive action on
the part of the occupier of the land was recognised – Leakey v
National Trust

Unsure what amenity interests are protected. In Tetley v Chitty 1986, noise from a go-kart track was held to be an actionable nuisance, as was the bad smell emanating form a pig farm in Bone v Seal 1975. But no action lay in the blocking of a view or prospect : AG v Doughty or prospect of TV and radio reception : Hunter v Canary Wharf.

If a loss of amenity resulting from personal discomfort can be actioned, then the courts have from time to time extended this head of liability to encompass actual personal injury. After all, it seems logical in a way that if discomfort is actionable, injury should be actionable. However, in Hunter v Canary Wharf the House of Lords doubted that personal injury could amount to a nuisance - nuisance is concerned with the rights in land, not with bodily integrity.

Although some losses of amenity value may be actionable, the courts have not accepted that all losses are so actionable. For example, in Hunter, interference with television reception was not held to amount to a nuisance. In a way this is strange, because many people would be deterred from owning land that did not obtain adequate television reception; this particular part of the Hunter decision has been rejected by some other common-law jurisdictions (e.g., in the Canadian Nor-Video case).

A further problem with the principle that loss of amenity is recoverable is that whether there is a loss of amenity will depend on what the claimant does on his land. If the defendant has the poor fortune to live next to someone who carries on a particular line of business, and the defendant's actions are deemed to reduce the amenity of the neighbouring land with respect to that business, then he will be liable. Admittedly the courts have been reluctant to impose liability where the claimant's activities are unsually sensitive to interference (e.g., Robinson v Kilvert 1889).

References

F.H. Newark in his article The Boundaries of Nuisance

Public Authorities

2009-02-22T20:21:00.000-08:00

There is a clear reluctance to hold public authorities such as the police, emergency services, social services in the UK liable. No special principles govern the liability of public authorities. The ordinary requirements of foreseeability, proximity and fairness, justice and reasonableness must be satisfied must still be satisfied. - Justin Santiago

The argument is that liability should not be imposed on public bodies for three reasons :-

1. They are set up for the purpose of protecting the public or a section of it and it is clearly foreseeable that harm may be suffered if the supervisory or regulatory work is carelessly done. It would be putting too much liability on public bodies preventing them from administering their duties.

2. Any award for damages will come out of public funds.

3. There will be intrusion by the courts into the workings of bodies which form part of the democratic process.

There have been several case law developments which point to making public authorities more liable for negligence as well as HRA 1998 which has forced courts to not make it so easy for defendants to deny there was a duty of care and hence escape liability.

However what would would tilt the balance in favour of the public bodies being held liable for negligence would be if the there was a single claimant involving personal injury. Kent v Griffiths – single claimant, personal injury held liable contrast with Capital and Counties plc v Hampshire County Council Capital and Counties – multiple claimants, property damage not held liable. Also Barret v Ministry of Defence – claimant can be identified as an individual who is in real and imminent dangerand not merely in the same position as the public at large held liable.

Some cases involving failure to act will also shed light on the extent to which the courts will hold public authorities liable. In Stovin v Wise: public authorities cannot generally be held liable for a failure to act, so long as they have not actually created the danger themselves. Lord Hoffmann left open the possibility that a public body could be held liable for a failure to exercise a statutory discretion where (1) the failure to do so is Wednesbury unreasonable or irrational and (2) there are exceptional grounds for holding that the policy of the statute requires compensation.

Gorringe v Calderdale further suggested that in the absence of a right of action for breach of statutory duty and in the absence of any underlying common-law duty owed by that public body to an individual, the omission on the part of the public body can found a private law right of action by that individual.

The effect of the HRA 1998 has been twofold :-

1. Vertical effect – allows any person who is the victim of a public authority’s breach to bring proceedings against the authority - the message to the English courts is that they have been wrong to afford public authorities an immunity from negligence liability for instance allowing pre-emptive tactics such as preliminary striking out applications on the bases there was no duty of care, Hill v Chief Constable of West Yorkshire and X (Minors) v Bedfordshire County Council, Osman v Ferguson on appeal to Osman v UK based on Article 2 – everyone’s right to life shall be protected by law, Article 8 – right to family life, Z and others v UK (petition by X (minors) v Bedfordshire County Council).

2. Horizontal effect – one may rely on the convention even in litigation against another private person and the courts must ensure that all their decisions are human-rights compatible since the courts are public authorities under the HRA 1998. The central provision of the Act is to be found in S6(1) which states : “It is unlawful for a public authority to act in a way which is incompatible with a Convention right.”

Sale of Goods by Non-Owners

2009-02-22T19:03:00.000-08:00

Situations involving sale of goods by non-owners

a. Stolen goods

If the goods turn out to have been stolen, the buyer is entitled to the return of the whole of the purchase price – breach of condition implied by S12(1) – right to sell the goods must have a title that can be conveyed - Rowland v Divall. It is not only breach of an implied condition but there is no consideration as the buyer has paid the purchase money without any corresponding detriment on the seller's part. The whole object of a sale to transfer property from one to another has been defeated.

b. Imitation goods

Property is in the goods but no title and therefor there is no sale as there is no title to convey – Niblett v Confectioners’ Materials.

c. Mistake as to identity

Whether the title is voidable or void - the real test lies in the intention of the original seller. If his intention was deal with and pass title to the original buyer, regardless of the fraud, then the contract will merely be voidable : Ingram v Little. If his intention was to pass title not to the original buyer but to someone else, but was defrauded into dealing with the original buyer then the contract will be void – Shogun Finance Ltd v Hudson . A however can void B’s title by making a report to the police : Car & Universal Finance Ltd v Caldwell.

The original owner word argue that the title transferred by the seller was not merely voidable but void in order to continue to assert his right as owner.

References

Battersby and Preston The concepts of property, title and owner used in the Sale of Goods Act 1993

Graham Battersby A Reconsideration of Property and Title in the Sale of Goods Act

David Tiplady When is a seller not a seller

Product Liability

2009-02-22T18:08:00.000-08:00

The trend towards strict product liability is becoming increasingly evident. Discuss. - Justin Santiago

The duty of manufacturers has been extended and refined since Donoghue and Stevenson and has taken on elements of strict liability under the Consumer Protection Act 1987 because of the difficulties in proving negligence namely causation. Although fault need not be proved it is important to remember that the defendant’s actions caused their loss, that the loss is recoverable and that there are no defences which obstruct their claim or limit their damages. It should also be noted that strict liability does not mean automatic liability but simply that the claimant does not have to prove that the defendant has been at fault.

As a general rule anyone who suffers personal injury or property damage that is caused by a defective product may recover to the full extent of his loss. S5(1) allows for recovery for personal injury. Property damage is claimable under S5(3) and 5(4).

Under provisions of this law, a producer would be found liable if a consumer is injured by a defect in the product even though it was not negligent and exercised all proper care necessary protect the producer or even if the risk could not have been recognised at the time of supply : Abouzaid v. Mothercare (UK) Ltd.
The case depended on whether the product had a defect as defined in Section 3 of the act. Section 3 provides that a product has a defect if the safety of the product is not such as persons generally are entitled to expect at the time the product was purchased.

The Court of Appeal considered that a defect, within the Consumer Protection Act, depended on a consumer's "expectations" of safety. The court considered whether public expectations had changed between 1990 and 1999. It concluded that there had been no change. Therefore the product was defective in 1990. The court accepted that the public was entitled to expect a certain level of safety in a product even where a producer could not reasonably have anticipated a particular risk and guarded against it. In A v National Blood Authority – as long as the risk of infection was known it was irrelevant that all reasonable steps to detect such risks.

Consumer expectations of safety are the key to defining a defect under the Consumer Protection Act. However the fact these expectations may change over time is an unresolved problem under the act. Also, it is not the consumers' actual expectations of safety that is important under the act but what consumers are entitled to expect. Grey areas will still cause problems until more cases have been through the courts. For example, in Richardson v. LRC Products it was held by the High Court last year that, in the case of a condom which ruptured in use, the product was not defective because the public was not entitled to expect that any method of contraception intended to defeat nature would be 100% effective.

The case also demonstrated the difficulties with using the development risks defence. The argument that an undiscoverable risk at the time the product was in circulation could be used was rejected by the courts citing that such a defence would undermine the effect of the strict liability provisions in the act. The Court of Appeal considered that whether a producer might be expected to have discovered the defect had nothing to do with the state of scientific or technical knowledge at the time. It would have been a simple matter to discover the defect by performing a practical test. No advance in scientific or technical knowledge between 1990 and 1999would have been required to perform such a test. The only reason that such a test had not been carried out was that the manufacturers had presumably not thought of doing one. This risk was the same in 1990 as it was in 1999 and therefore, if it constituted a defect in 1999, it constituted a defect in 1990.

There have been some criticisms levelled at the CPA because it is no easier to prove that a product is defective than to prove that it was negligently manufactured.

There are also criticims that express warnings on the packaging would be absolved from liability following Worsely v Tambrands Ltd where a claim would fail if :-

1. There was a clear and legible warning on the outside of the box
directing the user to the leaflet
2. The warnign was legible, literate and unambiguous and contained all the material necessary to convey both the warning signs and the action required if any of them were present

Nemo dat rule

2009-02-17T20:22:00.000-08:00

In what ways does commercial law protect a bona fide purchaser of personal property? - Justin Santiago

In commercial transactions, balance has to be made between rights of a bona fide purchaser and the strict application of the nemo dat quod non habet rule – no one can give a better title than he himself possesses enshrined under common law and under statute - Sale of Goods Act 1979 S21(1). This is exemplified in Lord Denning’s judgement in the case of Butterworths v Kingsway North Finance - in the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title.

From the historical point of view, the law has leaned towards the owner. However more recently the priority is given to security of transactions and the innocent purchaser has been given slightly more protection. The reason for the alteration might be owed to the following two realities :-

Firstly, it is often the case that the owner voluntarily transfers possession to the fraudster and he is certainly able to assess the risks inherent in the transaction, eg the fraudster’s creditworthiness. The buyer, on the other hand, rarely has either the time or the ability to investigate the title to the goods as, unlike real property, there is no certain method of ascertaining such title.

Secondly, the owner is frequently insured against the loss of his goods and will be able to claim on his insurance policy.

There are several exceptions to the nemo dat rule

1. Estoppel

An estoppel, when successfully raised, prevents the true owner from claiming that the sale of goods was unauthorised. An estoppel arises when the true owner leads the innocent purchaser to believe that the unauthorised seller has the right to sell the goods. In such a case the owner of the goods is precluded (estopped) from denying the seller’s authority to sell : S21(1) of the Sale of Goods Act. In order to be successful in estoppel, the following points must be established:-

(i) The true owner intentionally or negligently represents that the seller has the owner's authority to sell the goods as his agent;
(ii) The innocent buyer acts in reliance on the representation; and
(iii) The innocent buyer buys the goods.

However the scope of estoppel has been narrowed :-

Moorgate Mercantile Co Ltd v Twitchings – for estoppel by negligence to take effect there must be a duty owed, carelessness in handing over possession of goods or documents of title is not enough. The significance of the case lies in the fact that the court treated the existence and the nature of the duty to take care in such circumstances as the same as those which arise in the ordinary law of negligence. In other words, negligence must be more than mere carelessness and amount to a disregard of the owner’s obligation towards a person setting up the defence. The bona fide purchaser must be able to show that the owner owed him a duty of care.

Mercantile Credit Co Ltd v Hamblin – there was no estoppel by negligence because although there was a duty of care there was no breach of that duty, additionally the proximate or real cause was the fraud of the dealer

Shaw v Metropolitan Police Commissioner the estoppel principal did not apply where there was only an agreement to sell.

Debs v Sibec Development Ltd suggested that, even though the owner’s statement may be an unequivocal representation of the seller’s authority to sell the goods, it will be insufficient unless it is made voluntarily.

2. Factors Act 1889

This exception applies where a mercantile agent is, with the consent of the owner, in possession of goods or documents of title to goods, any sale, pledge, or other disposition of the goods, made by him when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this act, be as valid as if he were expressly authorised by the owner of the goods to make the same, provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition noticed that the person making the disposition has no authority to make the same.

In order to pass a good title to the innocent purchaser, the following must be established:

(i) The mercantile agent must be in possession of goods or of the documents of title to goods. A bill of lading is a document of title but not the registration documents for a motor vehicle. Furthermore, it is generally accepted that a person must be a mercantile agent at the date he receives the goods and it is insufficient that he subsequently becomes one, unless there is further consent to this possessing the goods at the date when he has become a mercantile agent.

(ii) The possession must be with the consent of the owner. Consent is presumed in the absence of evidence to the contrary, and withdrawal of the consent is not effective as against a third party who takes without knowledge of the withdrawal of consent and under a disposition which would have been valid if the consent had continued. At Common law, if I deliver my car to a motor dealer for sale, I entrust my car to him as a mercantile agent. Then I leave my car for the purpose of repair, then even though he is a mercantile agent I have not consented to his possession of the car in that capacity and the section will not apply to a wrongful disposition made by him. Consent obtained by fraud is nevertheless an effective consent with the meaning of this section.

(iii) The sale must be in the ordinary course of the mercantile agent’s business. As to this question, I think Buckley LJ has given the best explanation in Oppenheimer v. Attenborough & Son. It reads as follows: ‘acting in such a way as a mercantile agent acting in the ordinary course of business of a mercantile agent would act’; that is to say, within business hours, at a proper place of business, and in other respects in the ordinary way in which a mercantile agent would act, so that there is nothing to lead the buyer to suppose that anything wrong is being done, or to give him notice that the disposition is one which the mercantile agent had to authority to make.

(iv) The person taking under the disposition must act in good faith and without notice of the mercantile agent’s lack of authority. The onus of proof on these issues lies upon the buyer.

3. Voidable contract (S23)

Under this exception a voidable title that has not been avoided yet could be transferred to a buyer that did not know about the deficiency of the title. If a contract is voidable, but sold before it is avoided the 3rd party would have good title.

4. Seller in Possession (S24)

Basically, a seller who is possession of the goods that he sold, can sell them again to a 2nd buyer and that buyer can acquire a good title if he receives them in good faith and without notice of the first sale. To a great extent, this exception derives from the fact that it is difficult to establish ownership in respect of goods, and therefore possession of goods is to be taken as prima facie evidence of ownership. Here several aspects have to be considered before the exception applies.

Firstly, in relation to possession, it should be noted that this exception applies not only in the situation where the seller ‘continues’ in possession but also where he is ‘in possession’ at the time of the second disposition. In Worcester Works Finance Ltd v. Cooden Engineering Co Ltd, Lord Denning MR considered that this phrase referred to the situation where the seller did not have possession when he sold the goods but ‘they came into his possession afterwards’.

Secondly, as to the delivery or transfer of goods or documents of title, it is not the document itself or the issuing of such a document of title which confers rights of ownership; it is the transfer to a second buyer of a document of title which is already in the possession of the seller, and which he was not parted with under the first contract of sale, that defeats the claims of the first buyer. The second buyer will not acquire title unless there is a delivery of goods or transfer of documents of title. For the second buyer to acquire good title, the seller must deliver possession of the good or documents of title, merely contracting a sale is not sufficient to give title to the second buyer : Michael Gersno v Wilkinson.

Thirdly, when we turn to look at good faith and want of notice, this exception mostly resembles the above exceptions. Furthermore, this good faith and want of notice must exist at the date of delivery of the goods, or transfer of documents title, as well as at the date of the seller’s disposition. If the seller wrongfully resells the goods to an innocent purchaser but before the delivery of the goods to him that purchaser becomes aware of the previous sale, then he is subordinated to the rights of the original buyer and does not acquire title. His remedy is to rescind the contract of sale and/or claim damages for breach of the condition of title.

5. Buyer in Possession (S25)

This exception allows a buyer who has been allowed by the seller to take possession of the goods or documents of title before property has passed, and then resells. Provided that there is actual delivery, the new purchaser who takes in good faith and without notice will obtain a good title. In terms of detailed discussion on seller in possession, here I just would like to add little difference of buyer in possession. The goods must be with the buyer with consent from the seller, it does not matter if he acquired the goods by a criminal offence as long as the owner consented and does not matter if the owner revoked his consent later. Another requirement is that the buyer must obtain possession of the goods or the documents of title to the goods. Constructive possession is sufficient here if the first buyer requested the seller to deliver the goods directly to the 2nd buyer. Also, the nature of the possession does not matter even temporary would suffice : Marten v Whale. It also seems possible for delivery to take place in an undivided bulk, although it would seem to conflict with s16 which does not permit a transfer of property in an undivided bulk of goods except in the circumstances set out in s20 inserted by the 1995 Act.

6. Part 3 of the Hire Purchase Act 1964

A bona fide purchaser for value of a motor vehicle from a person in possession under a hire-purchase agreement or a conditional sale agreement obtains a good title. This protects purchasers of motor vehicles who buy cars from hirers of cars on hire-purchase terms.

The details of Part 3 are quite complex, but the most important points are as follows:

(i) In respect of motor vehicles, the seller must be someone who is hiring the vehicle under a hire-purchase agreement or buying it under a conditional sale agreement.
(ii) The sale must be to a private purchaser, who must not be a dealer (or a finance house) carrying on business in the motor trade. This is so even where the dealer acquires the car for his own private purposes : Stevenson v Beverly Benticle Ltd.
(iii) Only the first private purchaser from the hirer (or ‘debtor’, as he is termed in the Act) is protected.

The onus of proof is on the purchaser to prove that he bought the car in good faith : Barker v Bell and without notice, if he succeeds, the HP company might want to show that B1 was not a purchaser in good faith, so that no title can pass from the start, or it might want to claim that the car was not disposed by the hirer at all, but was, for example, stolen from him, or was disposed by someone else.

It is elementary learning to identify nemo dat quod non habet as the most important conveyancing principle in English commercial law, however, that the innocent purchaser who buys in good faith needs some protection, and so there are various exceptions to the nemo dat rule. The main difficulty with the legislative response is that on the one hand it is too extensive in terms of legal consequence whilst on the other it is too restrictive in its scope because the protection to the innocent buyer is somewhat piecemeal.

Some reforms have been suggested, such as the adoption of uniform treatment for all transactions whereby a security interest is reserved in relation to goods, and the introduction of a system of registration for non-possessory securities. The most fundamental proposal might be the creation of an ‘entrusting’ principle. That is, whenever an owner has entrusted his goods to another or acquiesced in their possession by that other (‘the possessor’) in a wide range of contractual situations, any sale of goods by the possessor in the ordinary course of business to an innocent buyer would confer a good title on the latter.

Reform in this area of law is found in the judgement of Devlin LJ in Ingram v Little Devlin LJ as he then was, suggested that it might be possible to apportion the loss which occurs when an innocent owner and an equally innocent bona fide purchaser are left to dispute over the title to goods after some dishonest middle party has quit the scene. However this was rejected by the Law Reform Committee on the bases where the goods pass through several hands.

Comparison between different legal systems

Although the nemo dat rule is firmly entrenched in English law, many people hold the opposite view and they believe that the bona fide purchaser should be equally protected or even prior to the owner. In fact, many European systems invert nemo dat and consider the dominant principle to be protection of the bona fide buyer of goods.

In France, the sale of a thing belonging to another is treated as being voidable, which may give rise to damages if the buyer is ignorant that the thing belonged to another. Nevertheless, the sale may be treated as valid if the buyer has dealt with someone he considered to be capable of selling and both parties were induced by a common and legitimate error into concluding the sale. Where the buyer sues for rescission and damages from the would-be seller, a judge may decide not to award damages if in his opinion the seller has acted in good faith. This may be contrasted with the situation prevailing in the United Kingdom which are remarkably complex and subject to many common law and statutory exceptions.

Property

2009-02-17T18:20:00.000-08:00

The significance of property in commercial transactions. - Justin Santiago

Property as a concept is not the physical goods themselves but the proprietary right or legal interest in the goods. The importance of property pertains to the passing of property and correspondingly the passing of risk and the rights of buyers and sellers.

The Sale of Goods Act sets out the rules for determining when property passes from the seller to the buyer. The importance of determining when the property passes is :-

i) that the risk of accidental loss or damage passes to the buyer when the property passes unless otherwise agreed.

ii) once the ownership passes the owner can sue for the price, under the provisions of s49 (1). S.O.G.A.

iii) If the seller resells the goods once ownership has passed then the subsequent buyer does not take title to the goods unless he comes under an exception to the Nemo Dat Rule under s24 S.O.G.A.1979.

In the case of the passing of risk Section 20(1) in SOGA states, "Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not." Therefor we need to know whether property can pass, when does property pass and implications for buyers and sellers.

Whether Property Can Pass

The state that the goods are in will determine whether property can pass - if it is identified or scertained at the time the contract is made, then it is one for the sale of specific goods. If they are not identified at the time of the contract they are unascertained goods : Re London Wine Shippers. In this case the company was an insolvent wine dealer which had stocks of wine in several warehouses. Some of the wine had been sold to customers for laying down or investment purposes. Although it was clearly contemplated that the wine would belong to the purchasers and would be stored by the company, no appropriation from the bulk of the wine in storage had been made to answer any particular contracts. In the absence of appropriation by earmarking or otherwise setting aside each purchaser’s wine, legal property did not pass under S16 of SOGA 1979. Accordingly nor had the company created a completely constituted trust sufficient to pass the equitable title.

Property will only pass when it is know to what the property refers to as per Lord Mustill’s dictum in Re Goldcorp Exchange. The time for ascertainment is at the time the contract was made. However under Section 20A, a buyer who has paid all or part of the price of an unidentified part of an identified bulk will be an owner in common of the bulk.

When Does Property Pass

If the goods are specific or ascertained, the parties are free to make whatever agreement they like about when property is to pass S(17) which can be inferred from the terms of the contract, conduct of the parties and circumstances of the case. This is in line with the basic freedom of contract philosophy where the parties are free to decide for themselves what contract to make and what terms to incorporate.

If the terms are not clear then intention will be a governing factor. If this intention is not apparent there are several rules under S18 Rules 1 to 5 to determine this intention :-

Rule 1 : Goods in a deliverable state : Underwood Ltd v Burgh Castle – a machine that was attached to a factory floor and therefor was not in a deliverable state was deemed not to be intended to pass.
Rule 2 : Goods not in a deliverable state
Rule 3 : Price to be ascertained
Rule 4 : Sale or return
Rule 5 : Unascertained goods and appropriation : Unconditional appropriation – irrevocable identification of the goods and beyond the power fo the seller to substitute goods – Carlos Federspiel & Co SA v Charles Twigg & Co Ltd.

Another provision S35 SOGA 1979 provides that property must finally pass when the buyer has accepted the goods or where he indicates to the seller that he as accepted the goods or when the goods have been physically delivered and the buyer has had a reasonable chance to examine them and after a reasonable lapse of time keeps the goods not having said he is rejecting them or there is inaction : Pignataro v Gilroy.

Implication for buyers, sellers

The passing of property also has implications for the type of action that can be brought by the seller against the buyer.

If the property has passed to the buyer, the seller has either the right to sue for the price S49(1) if the buyer has accepted the goods or sue for damages if the buyer has not accepted or refuses to accept the goods. If property has not passed then the seller can only sue for breach of contract.

The passing of property would also have important implications in the passing of risk. If property is passed, the risk is passed along with the property and the party to whom the property passes bears the risk i.e. bears any loss should anything happen to the goods - lost or damage.

However the general rule will not apply in the following instances :-

1. Where parties have explicitly agreed that the risk should pass even thogh property has not passed : Head v Tatersall;

2. Where it involves a CIF contract which is an exception to the general rule in S20 - the goods are deemed to be at the buyer’s risk from the time of shipment even though property passes at the time the contract is made which may be after the shipment;

3. Where the seller has done all that he had undertaken to do by enabling the buyers to take delivery even if the goods are unascertained : Sterns v Vickers;

4. Where one party is the bailee of the goods and the loss occurs through their lack of reasonable care in which case that party will be liable : Wiehe v Dennis Bros.

Implications for third parties

The right of property can also have an effect on third parties - determines the ability of the party to bring an action under negligence against third parties who has carelessly inflicted damages upon the goods : Leigh & Sullivan Ltd v Aliakmon Shipping Co Ltd. However right of property alone will rarely be decisive. Usually it is combined either with a right to possession or with a contractual right against the third party for example the person who is entitled to sue in respect of goods damage at sea is usually the person who holds the bill of lading and that person has a contractual right both against the carrier and also the property.

Where the seller is required by contract to send goods to the buyer via a carrier, delivery to the carrier is presumed to constitute a delivery to the buyer and the buyer bears the risk of the loss S 32(1) – delivery to carrier buyer bears loss, S33 – delivery to a distant place and deterioration in the goods buyer bears loss.

The approach to passing of property as the determining factor in the allocation of risk has been abandoned by the Uniform Commercial Code (UCC) in the US. It was felt that there was an over reliance on property as the central organizing concept. The location of title was used to determine the risk of loss, insurable interest and place and time for measuring damages. The single title or “lump” title concept proved unsatisfactory because of the different policy considerations involved in each of the situations that title was made to govern. Furthermore the concept of single title although it worked well for cash on the barrel type sales it did not reflect modern commercial practices with the introduction of deferred payments, security arrangements, financing from third parties or delivery by carrier which required a fluid concept of title. The classic example of this was the rule
that property cannot pass to the buyer where he purchases goods in an undivided bulk – S16 SOGA 1979. The result of this statutory rule in cases where the seller has become insolvent is that the buyer loses both the money he has paid for the goods and the goods themselves to the seller’s creditors – hardly a just result – this was the reason for S20A.

It would be logical to link the passing of risk with physical possession of the goods :-

1. It is the person in possession who has the greatest ability to take care of the goods to see that they are not stolen, burnt, damaged, etc. If he has to bear the risk of any loss then he has the consequent incentive to exercise that care.

2. It is likely to be much easier to secure insurance cover for goods on your own premised or otherwise within your own possession.

Retention of Title

2009-02-17T17:48:00.000-08:00

Retention of title clauses affords adequate protection for the seller. Discuss. - Justin Santiago

A retention of title clause (also called a Romalpa clause in some jurisdictions) is a provision in a contract for the sale of goods that property in the goods remains vested in the seller until certain obligations (usually payment of the purchase price) are fulfilled by the buyer. These clauses first appeared in Aluminium Industrie BV v Romalpa Aluminium.

Retention of title clauses are a device to protect the seller against the buyer’s insolvency. If the buyer becomes insolvent, a seller who has a valid retention of title clause will have a significantly improved position and enables the seller to recover goods that are unsold or moneys that have been paid into a separate account from the sale of goods.

However in practice they provide sellers with rather less protection than might be expected due to several obstacles namely difficulties in recognising such clauses and distinguishing them from charges, practical difficulties in identifying goods covered by the clauses and the fact that goods will remain at the seller's risk until additional clauses are inserted:-

1. Difficulties in recognising such clauses as incorporated in a contract

The use of Romalpa clauses has been criticised in Borden (UK) Ltd v Scottish timber Products Ltd where Templeman LJ said : It is therefore surprising that this court looked with sympathy on an invention designed to provide some protection for one class of unsecured creditors, namely unpaid sellers of goods although there is no logical reason why this class of creditor should be favoured as against other creditors such as the suppliers of consumables and services.

His argument also stems from the fact that Retention of title clauses are not required to be registered as a charge under S.365 of the Companies Act 1985 and are enforceable without being registered : Armour v Thyssen unlike the four types of consensual security: pledges, contractual liens, charges and mortgages which are created by the buyer and can be registered under Companies Act S395. The clauses are seen as an anomaly in that it gives a proprietary right and is enforeceable without being registered and that because the full legal title remains with the seller, the buyer simply does not have the capacity to create a charge.

Such clauses can be confused with charges that are not registered. This point was argued in the case of Re Bond Worth where the contract of sale provided that equitable and beneficial ownership of the goods remain in the sellers until the price is paid. It was held by Slade J that these provisions were consistent with the creation of a floating charge and it was void for non-registration as a charge under the Companies Act. Romalpa clauses can be thought as “sham devices” masquerading as equitable charges.

2. Practical difficulties in relation to the identity of the physical goods :-

a. Because possession is with the buyer problem of obtaining access to the buyer’s premises or other place where the goods are believed to be in order to identify them

b. Distinguishing the seller’s goods from those supplied by others or those that have been paid for from those that have not

c. Retention of title caluse will cease to be effective once the goods have lost their identity by becoming incorporated into something else : Borden v Scottish Timber Products – resin becomes incorporated into chipboard.

d. The goods may have been sold.

3. Goods will remain at the seller’s risk until property in them passes to the buyer

Therefore a clause stating that the goods will be at the buyer’s risk from the moment of delivery or else to cover by insurance for loss or damage caused after delivery by accident, act of God or act of a third party has to be inserted.

Additionally other clauses will have to be included :-

- ‘manufactured goods’ clause, whereby the seller retains title to the goods even after they have undergone a manufacturing process;
- ‘proceeds clause’, whereby the seller is entitled to the proceeds of a sale of the goods to a third party; and finally
- ‘all monies’ clause under which the seller retains to the goods until all the debts owed by the seller to the buyer are extinguished.