Balancing commercial and private interests

One of the challenges of incorporating socio-legal perspectives into our teaching is that sociological data so quickly become out of date. In teaching the topic of mortgages over the past 25 years, for example, I have repeatedly had to amend my notes to deal with repeated booms and busts, periods of easy cash and property sales followed by recessions and repossessions. It seems that there is always a mortgage scandal of some kind in the news. But this can be a boon, too: because there is always something novel and topical to focus on, mortgages are a splendid topic for socio-legal investigation. Moreover, they provide the clearest example of the way English land law tries to deal with the conflicting rights of commercial bodies (mortgagees) and private individuals (home owners).

First we had the crisis over overriding interests and whether they could really bind mortgagees. The House of Lords' decision in Boland obliged conveyancers to change their practice. Their exaggerated concerns were only partially assuaged by the House of Lords' ruling in City of London Building Society v Flegg [1988] that overriding interests could be overreached. The combined effect of Boland and Flegg was to make purchasers and mortgagees very keen for the family home to be put in joint names, with both co-owners signing the mortgage agreement, to avoid any possibility of being caught out by any unsuspected overriding interest. This in turn led to a new problem with undue influence as husbands found themselves having to exert pressure on their wives to get them to agree to re-mortgaging the home where, in the past, they would simply have gone ahead without consulting them (as Mr Boland did). Undue influence consumed the courts for a good decade from the lead-up to Barclay's Bank v O'Brien [1994] to Royal Bank of Scotland v Etridge (No 2) [2001] and beyond.

What this recital of legal highlights reveals is that, whatever the issue, and however great the public outrage, the lender always calls the tune. Attempts by courts or legislators to provide greater protection to home owners or occupants are either minimal - for example, the two months' grace now afforded to unauthorized tenants of mortgage defaulters under the Mortgage Repossessions (Protection of Tenants) Act 2010 - or ineffective, as with Lord Browne- Wilkinson's guidelines for preventing undue influence in O'Brien. Efforts made to invoke the Human Rights Act 1998 in defence of defaulting mortgagors have come to nothing (Horsham Properties Group Ltd v Clark [2008]).

Why are lenders so apparently untouchable? There is a great deal of material out there, from newspaper reports to policy statements, demographic and statistical evidence, and all manner of sociological and economic commentary, to assist students in identifying the factors responsible for the current 'balance' of power. Questions they could consider are whether there should be more control and regulation, and whether this would make a difference; whether more could be done to prevent home owners from losing their homes, and from making unwise financial decisions in the first place; if so, how? They could examine the situation in other jurisdictions where, for example, home ownership is neither common nor officially endorsed, the mortgage industry is more highly regulated or loans for business purposes are not permitted to be secured on family homes.

Coursework in this area could take many forms. Students could read and compare the Court of Appeal and House of Lords decisions in Flegg, an exercise which directly confronts the problem of conflicting legal and policy principles and how different courts may choose to resolve the conflict in different ways. They could write an alternative judgment to the existing judgments in cases like Flegg, Etridge or Horsham, developing the law or applying it differently to the facts as the situation demands. This would need some preparatory training, but the Feminist Judgments book (Hunter et al., 2010) offers an excellent illustration of how it might be done. They could draft some statutory provisions, modelling their efforts on real legislation or Law Commission proposed Bills.

Undue influence case law offers some of the best examples of the 'balance' in action. When discussing the Etridge guidelines, students could be asked to consider whom the rules are intended to protect and whom they actually protect. This should lead to discussions about how co-owning wives (it is nearly always wives) might be better protected against undue influence, about which there is a large body of literature. They could be given an undue influence problem to analyse, with a supplementary exercise requiring them to write the solicitor's letter to the surety in the problem, following the Etridge guidelines. Some preparatory discussion about the appropriate style, tone and form for client letters would be needed here. To vary the exercise, and to confound gender expectations, you might make the client a man who leaves all financial decisions to his businesswoman wife. Or you could also make him (or her) an immigrant, alerting students (who may of course know this from personal experience) to the possibility that home ownership may have a particular significance for those already displaced from their homeland. Analysing an Australian case, Australia v Amadio (1983), O'Donnell and Johnston (1997, pp. 31-53) make the point that immigrants, facing discrimination in the job market, are more likely to go into business on their own, and thus more likely to need to borrow money against the security of their home; they are also more vulnerable, through lack of familiarity with the language and/or legal culture, to fraud or poor practice, as the English undue influence cases also demonstrate (Auchmuty, 2002).

Bankruptcy provides another example of the law's privileging of commercial rights over private. Students learn that the Insolvency Act 1986 s. 335A takes family circumstances into account but prioritizes the interests of creditors, unless those circumstances are 'exceptional'. Re Citro [1991] is authority for what is included in this description:

As the cases show, it is not uncommon for a wife with young children to be faced with eviction in circumstances where the realization of her beneficial interest will not produce enough to buy a comparable home in the same neighbourhood, or indeed elsewhere. And, if she has to move elsewhere, there may be problems with schooling and so forth. Such circumstances, while engendering a natural sympathy in all who hear of them, cannot be described as exceptional. They are the melancholy consequences of debt and improvidence with which every civilised society is familiar. (at p. 157)

It is worth getting students to consider what Lord Justice Nourse is really saying here. First, that the predicament of the bankrupt's wife and children is not exceptional (in fact, it is quite usual); and second, that it is due to debt and improvidence. But whose debt and improvidence? By omitting to specify agency here, the judge subsumes wife and children into a generalized blame, though they might in fact be (and probably are) entirely without responsibility for their situation. In any case, students might note, simply because a situation is familiar does not mean it is right, or even tolerable.

What gives support to a critical reading of Re Citro is a dissenting judgment by Sir George Waller, who calls into question the 'balancing' of private and commercial claims and agrees with the trial judge that sale should be postponed because the children 'were very much at the critical stage for their education' (at p. 163). Here is a convincing reason for enjoining students to read cases in full; dissenting judgments show them what might have been, what possibly should have been, and what might yet be. They also offer a model for the alternative judgment exercise mentioned above, demonstrating how the same law can be applied to produce a different (some would say fairer) result following different precedents or emphasizing different facts.

Turning to equity and trusts, O'Donnell and Johnstone note (1997, p. 23) that a surprising amount of the syllabus we teach centres on business. Students learn, for example, about the trust as a means of regulating family wealth (and of avoiding tax) and equity as imposing standards of conduct on professional trustees and company directors. An initial exploration of equity's conscience- based jurisdiction and its role in protecting the vulnerable is quickly left behind as we move on to specific uses of the 'discretion' with their fairly fixed rules and strict liability application in the commercial context.

What we teach, however, seems curiously at odds with what we know (and what the media tells us) about actual behaviour in the business world. Here we see the same resistance as in the mortgage industry to regulation of standards and protection of investors and clients through the availability of property-based remedies. Equity's interventions are portrayed as needlessly restrictive, impeding the free development of commerce, curbing risk-taking and over-protective of investor or client. To such critics Lord Millett famously observed:

There has never been a greater need to impose on those who engage in commerce the high standards of conduct which equity demands. The common law insists on honesty, diligence, and the due performance of contractual obligations. But equity insists on nobler and subtler qualities: loyalty, fidelity, integrity, respect for confidentiality, and the disinterested discharge of obligations of trust and confidence. It exacts higher standards than the marketplace, where the end justifies the means and the old virtues of loyalty, fidelity and responsibility are admired less than the idols of 'success, self-interest, wealth, winning and not getting caught'.

He went on with astonishing prescience (this was written in 1998): 'It is unrealistic to expect that employees can be given incentives through enormous bonuses without undermining their business ethics.' (Millett, 1998, p. 216).

As the banking crisis unfolded a decade later, my students found that Millett's views on the fiduciary relationship not only illuminated the abstract ideals of equity but politicized them. At the time he was writing, undue influence preoccupied the courts. Millett expressed 'serious misgivings' about the way the law was applied in these cases and how it was 'manifestly failing to give adequate protection to the wife or cohabitant who acts as surety' (p. 220). His statement continues to be relevant, and no doubt some other controversy will present itself when you come to teach this area, in the context of which you can ask your students for a critical analysis.

Human rights, once thought to have little application to property law, are now assuming more and more significance in a range of areas we cover. Though human rights disputes essentially pit private rights against public ones, they are often invoked in the commercial context. My experience indicates that human rights are most usefully introduced in the Land Law module in a separate session that not only sets out the relevant substantive rights under the European Convention on Human Rights (ECHR) but also reminds students of what they have doubtless been taught elsewhere but have probably forgotten or discarded at module's end, about the court structure, the ways Convention rules are applied, the state's defences, and the possibility of horizontal as well as vertical effect. Examples of their application can be drawn from areas of property law that will not be dealt with in detail on the course, such as housing law, leaving the case law relevant to your Land Law syllabus - for instance, Pye v Graham [2000] and Horsham - to be discussed in their specific context. This dual approach will help to reinforce both the principles and recognition of the pervasiveness of this theme.

But human rights also lend themselves to critical discussion per se. No treatment of the subject would be complete without consideration of what a human right is and, specific to property law, why there is no guaranteed right to property in the Convention (Harris, 1999). Here students could usefully be introduced to some statistics of property ownership worldwide, by region and by gender. Here, too, a consideration of the different cultural approaches to home ownership, again by reference to statistics and policy statements, can give students some idea of our relatively ethnocentric reverence for owning rather than renting. Students could discuss which other property rights, besides ownership, are candidates for protection in law. Indeed, there is something to be said for getting them to think about these matters before you outline the actual substantive rights, to bring home more starkly the gap between the ideal and the reality. Human rights have become so institutionalized now that one sometimes feels people have forgotten what purpose they are meant to serve. When half the world does not have enough to live on, is it right that a millionaire's wealth should be protected by human rights legislation?

Pye v Graham, to be discussed when you come to adverse possession on your course, provides the perfect opportunity to revisit the meaning as well as the law of human rights. Here the courts had good technical reasons for not finding for the applicant but the case inevitably raised the wider issue of how far human rights law should protect large wealthy companies with easy access to legal advice who simply sleep on their rights. In the old days before the coming into force of the Land Registration Act 2002 my classes used to enjoy spirited discussions about the morality of adverse possession (Auchmuty, 2004). Today's students are much less likely to be conscious of the arguments in its favour now that the Register is king. But even those who get exercised by the idea of land theft must have difficulty sympathizing with J A Pye and Company once they read the facts of this case and consider which was the more deserving party.

All this will lead students, I hope, to ponder the drawbacks and limitations of a rights culture. Since most of them will have grown up taking human rights for granted, they may find it hard to credit that anyone might seriously argue against them. Yet there was a robust critique at the time of the incorporation of the European Convention into English law which drew attention to the hierarchical and competing nature of rights, their partiality and reifying effect (Kingdom, 1992). Students could be asked to read and discuss the critical literature; alternatively, you could draft a suitable problem and get students to debate or write opposing arguments or role-play the issues.

Many students dislike the overlapping subject-matter of Land Law and Equity and Trusts. They would find it easier if the syllabuses were entirely separate and self-contained for ease of learning and knowing which rules to apply. Of course, as we tell them, life is not like that. Your client is not going to be interested in whether she has a land law or a trusts claim; what she wants from you is the correct legal analysis and the appropriate remedy. And the chances are that her claim involves principles from both areas. By the end of the year, however, students are going to have to face the fact that not only does Equity cross over into Land Law, it penetrates into many other areas. This is demonstrated by the work we do on equitable remedies. I have always found this a difficult topic to teach effectively. It can feel disconnected from the rest of Equity and Trusts, however much one tries to represent it as 'coming full circle' from the discussion in the introductory classes of equity and its 'new rights, new interests, and new remedies'. We are obliged to teach it: the professional bodies require it and, if we really want our students to be able to think like lawyers, we need to ensure they can follow through their analysis of legal issues and advice with a consideration of relevant remedies. Unfortunately, even if we focus on remedies in their property law applications, we cannot escape the possibility that a discussion of injunctions, for example, will take us into legal areas such as tort or intellectual property on which our knowledge of the substantive law may be hazy.

'Equitable remedies' has two good points, however: the cases are generally interesting, and it is one of those areas in which the law is actually developing, unlike many other topics in the Equity syllabus. As I write, the press is alive with criticisms of what journalists call 'super-injunctions', granted to protect the privacy of celebrities, with the Prime Minister quoted as saying:

What's happening here is that the judges are using the European convention on human rights to deliver a sort of privacy law without parliament saying so ... [whereas] what ought to happen in a parliamentary democracy is parliament - which you elect and put there - should decide on how much protection do we want for individuals and how much freedom of the press and the rest of it. (Boycott, 2011, p. 6)

Quotes like this provide a useful opportunity to engage students with the theme of commercial versus private rights. I would flash them up on a Powerpoint slide and ask students to analyse the statement. I would not ask for opinions at the outset - this too often invites uninformed 'belief' - instead, focus on the quote. What is the Prime Minister's view of the place of the European Convention on Human Rights in English law? (What is its place? - quick revision.) Is he concerned about its role or about the judges' interpretation of the law? Or is he (like many other politicians) simply cross because judges have power to make law at all? Is he right to be concerned?

These questions go to the heart of constitutional law, but they also go to the heart of equity. Injunctions are equitable remedies, imposed at the court's discretion, but only according to clear principles laid down in previous case law. (What are these principles? - another opportunity for quick revision.) We cannot know what precise facts prompted the Prime Minister's outburst in this case - the whole point of these injunctions is to suppress reporting of the facts - but newspaper accounts hinted that it was the usual claim under Article 8 of the ECHR (respect for home and family life) instigated by a male celebrity to hush up an embarrassing extra-marital affair. So here we note the increased use of this article, one with links to property law, and recall the discussion we have had on the meaning of a 'human right' and how far it should extend to this. But we can also reflect on whether the law should protect the media's commercial interest in newsmongering or the individual's interest in suppressing details of his private life.

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