{"id":480,"date":"2016-04-07T14:49:00","date_gmt":"2016-04-07T13:49:00","guid":{"rendered":"https:\/\/blogs.ncl.ac.uk\/nelr\/?p=480"},"modified":"2016-04-07T14:49:00","modified_gmt":"2016-04-07T13:49:00","slug":"ideology-in-private-law","status":"publish","type":"post","link":"https:\/\/blogs.ncl.ac.uk\/nelr\/2016\/04\/07\/ideology-in-private-law\/","title":{"rendered":"Ideology in Private Law"},"content":{"rendered":"

\"Indenture\"<\/a>It can be difficult to find ideology in the dry world of private law. Undergraduates are often attracted to the more controversial parts of the law \u2013 for instance, public law \u2013 where ideology is overt. The only real difficulty is, however, the need to look a little bit harder.<\/p>\n

The case of M&S v BNP Paribas<\/a><\/em> concerned the exceedingly dry topic of the implication of terms into a contract. This case in effect overturned the previous leading case, Belize Telecom<\/a><\/em>. It was a commonly-held view<\/a> that the effect of Belize Telecom<\/a><\/em> was that the court could imply terms that were not expressly put in a contract simply with reference to the process of construing the parties\u2019 intentions. The law was not constrained by the restrictive \u2018officious bystander<\/a>\u2019 and \u2018business efficacy<\/a>\u2019 tests. It was a case of determining what was agreed. But this was said to be \u2018wrong in law<\/a>\u2019 in BNP Paribas<\/a><\/em>.<\/p>\n

What possible ideological change could this have wrought? I suggest that it reflects acceptance by the senior judiciary, contrary to previous trends, that the private law cannot be made wholly subordinate to what persons and institutions want it to be without reference to external norms and community standards \u2013 what Alastair Hudson calls \u2018autopoiesis\u2019<\/a>. Instead, the courts are recognising that private law, to some extent, has to be subordinate to external norms and standards. In short, private law cannot be privatised.<\/p>\n

<\/p>\n

Belize Telecom<\/a><\/em> was the zenith of the \u2018Hoffmann School<\/a>\u2019, named after the judicial champion of the approach that disparate doctrines could be assimilated into that of simply determining the parties\u2019 intentions. Lord Hoffmann, beginning with the expansion of the process of interpretation<\/a> itself, had drawn in the doctrines of causation<\/a> and remoteness of damage<\/a> before tackling the implication of terms.<\/p>\n

An extra-judicial argument<\/a> to draw fiduciary duties into this school has been made by Edelman J. Edelman argues that the usual fiduciary duties not to put one\u2019s interest ahead of one\u2019s principal\u2019s, not to make a profit by way of the fiduciary office and to act in good faith are simply instances of the contractual agreement leading to implied terms. Clearly this requires an expansive approach to implication; these things are hardly necessary for business efficacy.<\/p>\n

Yet Edelman\u2019s argument ignores the fact that fiduciary duties import special equitable standards not referable to the intentions of the parties. Consider the marvellous dispute<\/a> between Foxtons<\/a> and Dr Townley<\/a>. Townley used Foxtons to manage the letting of a dwelling he owned. It is alleged that Foxtons took an enormous mark-up on maintenance contractors\u2019 fees; Townley cites a bill of \u00a3412.50 he says was marked up<\/a> by almost 50% to \u00a3616. Foxtons\u2019 justification is that the contract says that they can take a commission<\/a>.<\/p>\n

There are two possible outcomes, applying the current law scoping fiduciary duties. The first is that the fiduciary duty is displaced altogether<\/a>. This is highly unlikely; it would require a hugely reduced responsibility and\/or the circumscription of Foxtons\u2019 power and discretion to act on Townley\u2019s behalf. The second is that there is still a fiduciary duty. But the fiduciary duty is not commanded and delineated by the contract; it is merely shaped<\/a> by it. Once it is raised, its irreducible core<\/a> is not reduced by the parties\u2019 intentions. Therefore full and frank<\/a> disclosure of fees would be required to avoid liability to repay what is otherwise in effect a secret commission<\/a> contrary to the no-profit rule; a general clause is not enough. If the class action<\/a> succeeds, it will be very costly for Foxtons.<\/p>\n

Edelman\u2019s position represents a threat to the imposition of these external standards. It would permit the dilution of vital safeguards for persons such as Townley who are vulnerable to their agents\u2019 actions. Contracts such as these are offered on a \u2018take it or leave it\u2019 basis \u2013 allowing the economically dominant party to impose its terms on the weaker one. Privatising the regulation of fiduciary relationships would give such institutions carte blanche<\/em> and encourage predatory behaviour. Edelman\u2019s argument and Hoffmann\u2019s approach, while not addressing the consequences of the contractualisation of fiduciary duties, goes some way to enabling this.<\/p>\n

So how significant is BNP Paribas<\/a><\/em> to this? At face value, it just affects the doctrine of implied terms, merely superadding the requirement of \u2018business efficacy\u2019 to the test for implication in fact. But it, I suggest, represents the halt and reversal of the Hoffmann School. The senior judiciary have recognised that its expansion has gone too far and are rowing back to a more palatable position. The parties\u2019 agreement is not always king and external factors matter. Since, Edelman relies heavily on Lord Hoffmann\u2019s approach, it now seems highly unlikely that an English court would accept his argument.<\/p>\n

The wider context is the difference between the common law and equity. The common law reflects the ideology of the time when it was shaped; the commercial and industrial revolutions and the doctrine of laissez-faire<\/a><\/em>. According to Atiyah<\/a>, \u2018the function of the civil law \u2026 was to enable people to \u201crealise their wills\u201d \u2026 unhampered by government interference, and so forth.\u2019 Equity, on the other hand, was rooted in the notion of \u2018conscience\u2019 and concerned with the protection of vulnerable people. It is therefore unsurprising that equitable doctrines simply cannot be reduced to contract without risking their destruction.<\/p>\n

It also provides a safety valve for the development of regulatory law where the judges are expected to keep to the sanctity of contract. Atiyah<\/a> also noted that judges characterised terms implied in fact as the intentions of the parties; this permitted the courts, formally, to hold they were respecting the ideology of freedom of contract while they were in fact effacing it. BNP Paribas<\/a><\/em> can therefore also be seen as judicial recognition that this power needs to be retained both within and outside of the contractual sphere.<\/p>\n

Ideology matters. It matters to the dry and dusty corners of private law which in turn govern to rather more emotionally charged matters such as that faced by Dr Townley who said that Foxtons \u2018tried to rip off the wrong guy<\/a>\u2019. Ideology determines the kind of world we want to live in, and since private law delineates the rules and regulations of that world, ideology matters to private law.<\/p>\n

Derek Whayman
\nOutgoing Editor-in-Chief<\/p>\n","protected":false},"excerpt":{"rendered":"

It can be difficult to find ideology in the dry world of private law. Undergraduates are often attracted to the more controversial parts of the law \u2013 for instance, public law \u2013 where ideology is overt. The only real difficulty is, however, the need to look a little bit harder. The case of M&S v …<\/p>\n

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