The Law Quarterly Review July 2008, Vol 124

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NOTES
Charities and public benefit
Registered land, fraud and human rights
The methodology and extra-territorial
application of the Human Rights Act
Marrying financial provision and insolvency
avoidance
Foakes v Beer: reform of common law at the
expense of equity
347
351
355
361
Apparent gifts: re-examining the equitable

presumption
Termination and the third term: discharge and
repudiation
Clearing houses and insolvency in Australia
The Inn of the Outer Temple
369
373
379
384
364
388
422
445
469
REVIEWS AND NOTICES

Goold and Lazarus (eds): Security and Human
Rights
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OKeefe: The Protection of Cultural Property in
Armed Conflict
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Sparkes: European Land Law

McCrudden: Buying Social Justice
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513
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Something Old, Something New, Something Borrowed: an Analysis of
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PROFESSOR ANDREW KEAY AND JOAN LOUGHREY
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THE LAW
QUARTERLY
REVIEW
Volume 124
July 2008
NOTES
CHARITIES AND PUBLIC BENEFIT
IT is widely believed, not least, it seems, by the Charity Commission, that

the Charities Act 2006 heralds a new dawn not only in the administration
of charities, but also in the substantive content of the law. It is far from
clear that the Act justifies such a confident assumption. The lynch-pin of
the reform appears to be s.3 of the Act, which reads:
3 The public benefit test
(1) This section applies in connection with the requirement in section
2(1)(b) that a purpose falling within section 2(2) must be for the
public benefit if it is to be a charitable purpose.
(2) In determining whether that requirement is satisfied in relation
to any such purpose, it is not to be presumed that a purpose of
a particular description is for the public benefit.
(3) In this Part any reference to the public benefit is a reference to
the public benefit as that term is understood for the purposes of
the law relating to charities in England and Wales.
(4) Subsection (3) applies subject to subsection (2).
On one reading, this section effects no change at all and the Commissions
evident confidence that it has power to declare new substantive law must
be found elsewhere. A search for that other authority is equally fruitless.
The starting point for modern charity law is Pemsels case (Commissioner for the Special Purposes of the Income Tax v Pemsel [1891] 1
A.C. 531). In this case the Revenue sought to disallow fiscal privileges
for a trust the purposes of which included, in Lord Bramwells words,
the conversion of heathens and heathen nations to Christianity (at 563).
The issue turned into a debate about whether legal charity, with all its
privileges, was to be confined to its more popular meaning, limited to
347
348
Law Quarterly Review
[Vol. 124
eleemosynary objects, the relief of the poor. In a momentous split decision, the House held that legal charity was different, and the speech of
Lord Macnaghten has been the starting point for the modern law. He was
evidently somewhat irritated by what he regarded as an attempt by an
administrative department to change the law (at 591) and, having surveyed the authorities, concluded that trusts for the relief of poverty; trusts
for the advancement of education; trusts for the advancement of religion;
and trusts for other purposes beneficial to the community, not falling under
any of the preceding heads were accepted by the law as charitable. This
sentence, which summarises the 1891 law, is wholly about the benefit
requirement of charity law. The first three purposes were now incontrovertibly charitably beneficial and came within the spirit and intendment
of the Statute of Charitable Uses 1601. This was not the operation of
a presumption; it was a dogmatic assumption which could not be challenged. One was henceforth not permitted to argue in court that the relief
of poverty, and the advancement of education and religion were not beneficial for the purposes of charity law. The courts were to retain control
of the law by reserving to themselves the right to declare the definition
of what constituted the relief of poverty and the advancement of
religion and education, and the many cases on the first three heads
have seen extensive elaboration of these concepts. But there is no trace of
argument that, for example (whatever the empirical evidence to the contrary) the advancement of education is not beneficial, nor perhaps more
politically sensitive, that the relief of poverty is not beneficial because it
discouraged thrift (a live issue in 1891: see Lord Herschell at 572). There
was no rebutting this assumption. The only area for discussion after
Pemsel itself for instance was whether a particular belief constituted a
religion or if it was, whether the disposition in issue was advancing it.
Lord Macnaghtens fourth catch-all category contained other purposes which he at that time was unable to classify into general headings,
and the courts have treated this category as the one where the changing
perceptions of charity were be accommodated. By an administrative process of analogy, the courts multiplied the cases in this fourth head, and in
time some of these purposes became grouped together into classes, and
though the language of the books does not always adequately reflect it,
other heads came into analytical existence. So, for instance, prior to
this Act, the cure of the sick, the prevention of cruelty to animals and the
protection of the environment had become heads in their own right. In
matters of proof of benefit, they were indistinguishable from education,
religion and poverty: it was no longer needed. One could argue that a
disposition did not affect the environment, or that if it did, it was not
protecting it, but one could no longer deny that environmental protection
was beneficial in the meaning that term had in charity law. The heads
(2008) 124 L.Q.R., JULY SWEET & MAXWELL
AND
CONTRIBUTORS
JULY 2008]
Notes
349
which existed prior to the Act are substantially listed in s.2(2). A thirteenth head repeats Lord Macnaghtens open door fourth head, with
explicit provision for bringing it up to date by analogy with the existing
law in the fourth head. There is no provision in s.2 for new definitions
of these purposes and s.2(1) simply says the purposes listed in s.2(2) are
charitable purposes if they are for the public benefit (see section 3).
These purposes were undoubtedly seen to be beneficial prior to the Act.
Section 3(3) explicitly states that to find the meaning of public benefit
in this Part, reference is to be had to the law of charities. Under the
law relating to charities, this list of purposes in s.2(2) is therefore a list of
charitable benefits. A gift for the advancement of education tout court
will be conclusively a charitable gift and effect will have to be given to
it by way of a scheme.
Section 3(2) states that it will not henceforth be presumed that a
purpose of a particular description is for the public benefit. This
subsection carries much of the political weight of this Part of the Act.
Since there has never been a presumption of benefit, this provision, if
it means anything, may be taken to be no more than a restatement of
the old law that benefactors cannot themselves declare a purpose to be,
for example, educational within the meaning of charity law. But this is
a commonplace: there never was a presumption that benefactors were so
empowered. It is therefore hard to see how these three sections have in any
way altered the meaning of benefit (apart perhaps for minor tweaking
in s.2(2)) or helped in the search for it. There seems no warrant for the
assumption that, for instance, the Commission may now declare that the
advancement of religion is not charitably beneficial. A claimant may say
that if the disposition advances religion within the meaning of those words
in charity law, it promotes a charitable benefit. There is no need to prove
benefit in any different way after the coming into force of the Act than
was true before: proving it falls within one of the first 12 categories will
do it. It will indeed be bizarre if is held that a disposition simply to give
effect to one of the new statutory purposes, without more, is not to be
beneficial. Even existing dispositions in the residuary thirteenth head will
see no change. And those seeking admission to this last category will have
to demonstrate charitable benefit just as they always have. Section 3(3)
makes it clear that if you seek the meaning of public benefit in this Part
of the Act, you look at the law relating to charities. The fact that by
s.3(4) this search is not to take into account any presumption does not
affect the search one way or the other.
Lord Macnaghten was not however addressing the public element
needed for the establishment of a charity and this element was not in
dispute in Pemsel. It is to be greatly regretted that the Act and many of
the commentaries on it do not keep this element quite distinct from that of
benefit: it has had a quite different history and present role. The modern
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[Vol. 124
law has always been that those seeking to establish a charity have had
to prove that it was of a public character: this has not been presumed in
any way nor was it a matter for dogmatic assumption. In perhaps the best
known case on the public element in a trust for admittedly educationally
beneficial purposes, the House of Lords accepted counsels brief statement
of the law without demur:
It is for the appellant to show that it is a charity. This cannot be
a valid charitable trust unless it is of a public character, i.e., for a
purpose directed to the benefit of the community or a section of the
community. The appellant must therefore satisfy the court that that
class of employees defined is in fact to be considered not as a private
class but as a section of the public. (Oppenheim v Tobacco Securities
Trust Co Ltd [1951] A.C. 297 at 301)
With regard to public therefore, this subsection is no more than a
statement of the existing law, with the advantage only that it avoids the
complications which the use of the word presumption brings to the
concept of benefit. The old law as to the meaning of public would
appear to have been expressly preserved by s.3(3), the provision in s.3(4)
that eliminates the supposititious presumptions notwithstanding.
The notes on the Parliament.uk web page explaining the Bill give
the impression at some points that its promoters thought the Bill would
change the fundamental nature of charity law by requiring charities under
Lord Macnaghtens first three heads to prove a benefit. Quite apart from
the fact that in 2005 there were far more than three heads and that the
other newer heads were analytically identical in this respect, this may be
a case where the statute as drafted has not achieved its aim. The language
of Government spokesmen in the Commons and the Lords stresses the
way in which the Act would focus attention on whether institutions
claiming charitable status did in fact confer a benefit. If this is to suggest
that as a matter of administration, the Commission is entitled to ask
whether an institution is in practice carrying out its declared purposes, it is
unexceptionable. If it is intended to mean that in so doing the Commission
may insist on giving new meanings to public and benefit it is far from
clear that it would have statutory authority to do so. The Commission may
under s.4 issue guidance, but there is nothing in the Act (nor even, if it
is relevant, in the travaux preparatoires) to suggest that this guidance
will be binding. The Commission will be subject to the existing law of
charities when these sections are in force, just as it was before enactment.
JEFFREY HACKNEY.*
* Wadham College, Oxford.

Charitable purposes; Public benefit
AND
CONTRIBUTORS
JULY 2008]
Notes
REGISTERED LAND, FRAUD,
351
AND
HUMAN RIGHTS
LAST year there was a lot in the news about frauds committed against
property owners through forgery of signatures on land transfer forms.
Until very recently the technique was laughably simple. I would do a
search on thepublicLand Register (it cost me 2) and obtain details
of your registered property, I would download a form TR1 from the Land
Registrys website (free), type in your name and details of the property,
and my name as transferee, and then forge your signature at the bottom.
I would send in the form, and, within a few weeks, receive confirmation
that I was now the registered proprietor. Under the Land Registration
Act 2002 s.58, the mere fact of registration makes me legal owner, socalled statutory magic. Having applied to a bank for a loan secured
on the property, I granted a charge to the bank, which charge was then
registered, the bank paid me the money, and I disappeared into the sunset,
leaving no forwarding address. My name was probably not my real name,
either. The result was that one of two innocent people had to suffer: either
the bank (which relied on the Land Register) or you (who knew nothing
about it). Not very satisfactory.
Such cases occurred with increasing frequency in recent years. So much
so that, on November 5, 2007, the Land Registry somewhat belatedly
removed from its website copies of original documents bearing signatures
which could be copied for forgery purposes. And, on November 7, 2007,
an adjournment debate was held in the House of Commons on this subject,
on the initiative of Peter Lilley MP, one of whose constituents was the
victim of such a fraud (see Hansard, HC cols 238246 (November 7,
2007)). The concerns of the MP were responded to by the Minister of
State at the Ministry of Justice, Michael Wills.
Mr Lilley set out the details of the fraud practised on his constituent,
and the difficulties his constituent had then encountered, both with the
Land Registry and with the police. In the end the Land Registry accepted
liability, under the statutory indemnity system (Land Registration Act
2002 Sch.8) which law students are taught is one of the three pillars of
the land registration system in this country. He also mentioned concern
over the availability of personal information over the internet.
In replying, the Minister said the Government accepted that the problem
did exist, and that, in the context of 21 million registered titles, in the three
years to 2007 the Land Registry had paid out 12.5 million, on some 70
claims (col. 242). However, whereas the problem of fraud in the past
was largely domestic, it was now more professional. The Registry was
introducing new measures to deal with the growing problem.
Dealing with specific points raised by Mr Lilley, the Minister acknowledged (col. 244) that there had been recent public and media concern
about the public availability of information from the Land Registry over
AND
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352
[Vol. 124
the internet. The Government evidently considers that removing original

deeds from the website will in some way serve to prevent frauds of the
kind discussed here. But, in a case where the rogue has taken a lease of
the target property, he or she will already have a document (the lease)
signed by the registered proprietor (the landlord) whose signature can then
be copied for the purposes of the transfer form. And, if it is not on the
lease, then simply writing a letter to the landlord will usually elicit a letter
in reply bearing the signature.
What this illustrates is that taking these documents off the website in
order to prevent rogues having access to signatures is simply beside the
point. What we need is a system which does not rely on someone in the
Land Registry comparing a signature on the TR1 Form with a signature
which they have in the registry for some other purpose. What is needed is
a proper system for the verification of identity. I return to this issue below.
The Minister also said (col. 244):
It is important that the public have a legal right to inspect the register
of any title, and any documents that are filed in the Land Registry
in relation to any title.
That is nonsense. The only people who need to inspect the register are
those who intend to deal with the registered proprietor and thus to rely
on the register. The Minister said that such inspection assisted the buying
and selling of houses. This is true, but the benefit is marginal; there was
never any real problem in buying, mortgaging and selling houses before
the register became public. You just needed the proprietors permission
to have access to the register. On the other hand, this requirement helped
to keep eccentrics, busybodies and incipient fraudsters out.
Secondly, the Minister said that the open register enabled anyone to
find out who owns a piece of land, which can be invaluable in, for
example, cases of nuisance or neighbour disputes. But if anyone wishes
to conceal their ownership of a piece of land they buy it in the name of an
offshore company, or through the medium of trustees. And many people
do.
Thirdly the Minister said that the open register could itself be a
safeguard against fraud because it is transparent; no one can represent
themselves as owning a property that is registered to someone else.
Again, this is simply not true. Even if people do go and look on the Land
Register, and they discover that the seller is not the registered proprietor,
it is the simplest thing in the world for the fraudster to inform the other
party that the registered proprietor is simply a nominee or a trustee for
him or her, or is a company which he or she beneficially owns. There is no
reason why people should not believe such stories, because (as mentioned
above) they are so often true.
AND
CONTRIBUTORS
JULY 2008]
Notes
353
The Minister also said that in many other countries in the European
Union and beyond, land registers have been open for much longer than
they have in England and Wales and in fact, an open register is the norm
in countries with a land registration system. But there are different kinds
of registration system; some are open and some are not. And the fact that
other systems have a cadastral approach, and have had it for longer, is
irrelevant. Those systems were invented to enable the state to tax property
owners. In England and Wales there was no need for this, largely as a
result of the feudal system. Moreover, the Minister is ignoring the fact
that, in other European countries, with civil law systems, all transactions
involving land have to be carried out in person in front of a notary,
whose first task is to verify the identities of the persons attending. So the
risks of identity fraud are minimised, albeit at the considerable expense
of notarisation. The Minister is thus not comparing like with like.
But perhaps the most serious thing to be noted about Mr Willss speech
is that he made no mention of a very important change that was made
to the law of registered land by the Land Registration Act 2002. Under
s.64 of the Land Registration Act 1925 it was simply not possible to
carry out any registered transaction with a registered estate in land unless
the Land Certificate or the Charge Certificate (a document issued to the
proprietor on first registration or the proprietor of a first legal charge on
the property) was first produced to the Land Registry. This document
was therefore a very valuable one, equivalent in functional terms to the
deeds of title under the old unregistered system. In the 2002 Act, this
requirement to have a Land (or Charge) Certificate and produce it to the
Land Registry on the occasion of a transaction simply disappeared, in
order (it is said) to pave the way for electronic conveyancing. With the
dematerialisation of registered land ownership, an important safeguard
against fraud was simply dispensed with. Indeed, this was pointed out by
many practitioners at the time. It is surprising that the Minister did not
think it worth mentioning this. It would certainly have prevented the fraud
in the case of Peter Lilleys constituent. It would do so in other cases in
the future, too.
The question accordingly was what to do now. Plainly, simply taking
deeds off the Land Registry website was not going to stop fraudsters.
They would obtain the signatures they needed some other way. What was
therefore necessary now was something that should have been thought of
earlier, i.e. a system of proper checks to make sure that the person who
claimed to be the proprietor in making a disposition of registered land
actually was the proprietor.
One way of doing this was the old land certificate system. Plainly, the
old rule could have been reinstated. But there is no evidence that the Land
Registry was or is interested in this, much less that the Government was
or is prepared to make parliamentary time for any such legislative change
AND
CONTRIBUTORS
354
[Vol. 124
as would be needed. But if the Land Registry and the Government were
not prepared to go back to that system, then another would have to be
found.
Another way of dealing with the problem would be to insist that parties
to a land transaction must attend in person, much as they do before a notary
in the civil law systems. At that stage their identities could, and would,
be verified. However, this would be expensive, and also time-consuming.
Consequently, it might seem disproportionate, a sledgehammer to crack a
nut. This is particularly so when one considers that the existing rules on
money laundering do require verification of identity to take place in most
cases well before this point in the transaction.
Thus a better system would build upon the existing (anti-money
laundering) requirements to introduce a rule that the identity of the
transferor must be verified in all cases. In those cases where the transferor
is acting through solicitors, this is a very simple matter. The solicitors will
already have carried out the relevant money laundering checks on identity
and address in order to be able to act lawfully for the transferor. It would
therefore be possible to certify (for example on the form TR1) the fact
that the verification has taken place, and for the Land Registry not to
register the transfer without such a certificate.
As it happens, the Land Registry has now consulted on just such
a rule change. But, in advance of the change, the Registry has since
March 3, 2008without any apparent statutory sanctioninsisted on
satisfactory evidence being provided of the identity of non-legally
represented applicants in relation to transfers, leases, mortgages, and
discharges of mortgages, and (even when represented) applicants for
first registration where the deeds have been lost: see Land Registry
Public Guide No.20. Although the Guide in the relevant crossheading
refers to the unrepresented applicant for registration, instead of the
unrepresented disponor, it seems from the text itself that thisso far
unstatutoryrequirement is to apply to both. The identity verification
is carried out either by a solicitor or a licensed conveyancer (who will
probably charge a fee), or by attendance at a Land Registry customer
information centre.
However, a serious problem with the Registrys interim solution is that
it considers that it must make the contents of the new Forms ID1 and 2
available to anyone who asks to see them, since any person may inspect
and make copies of . . . any other document kept by the registrar which
relates to an application to him (Land Registration Act 2002 s.66(1)(c)).
Yet the information in these forms is exactly the sort of thing that an
identity fraudster is looking for.
The Land Registry is a public authority within the meaning of the
Human Rights Act 1998, and by s.6(1) must not act incompatibly with the
European Convention on Human Rights (ECHR), Art.8 of which confers
AND
CONTRIBUTORS
JULY 2008]
Notes
355
the right to respect for private life. There is undoubtedly an interest in

the Registry having this personal information, in order to prevent fraud.
On the other hand, there is none whatever in making it public. This
seems a clear violation of Art.8. Unfortunately primary legislation (Land
Registration Act s.66(1)(c)) on its face compels making the completed
(non-statutory) forms available to the public, and thatif upheldis a
defence for the Registry (Human Rights Act 1998 s.6(2)(a)). If s.66 cannot
be read down under s.3 of the Human Rights Act 1998, it is a case for
a declaration of incompatibility (Human Rights Act 1998 s.4).
However, and paradoxically, no legislation whatever compels anyone
to use these forms at all, since the consulted-on rule change has not yet
occurred. Thus, if an applicant refused to provide the form ID 1 or 2
unless guaranteed no publicity for it, which the Registry refused to
give, it is hard to see on what basis the Registry could refuse to process
the application, as (1) there is no current statutory requirement to provide
the form, and (2) the Registry would be refusing to respect Art.8 ECHR,
which is unlawful under s.6 of the Human Rights Act.
Quite apart from these human rights issues, however, there is the
problem that arises because the rogues first way on to the Register has
been apparently blocked. There must surely be some kind of countercheck in order to deal with the case where the rogue, thwarted in
forging the disponors signature, instead simply forges the signature of
the solicitor who has apparently carried out the identity check. Yet on
this the Land Registry Public Guide is entirely silent. It appears that
there is no crosscheck. But without that in place, the new system of
certificates (even when given statutory sanction) will simply not prevent
Land Registry fraud, and we may expect to see more of it in future.
PAUL MATTHEWS.*
THE METHODOLOGY AND EXTRA-TERRITORIAL APPLICATION OF THE HUMAN
RIGHTS ACT 1998
In Al-Skeini v Secretary of State for Defence [2007] UKHL 26; [2008] 1
A.C. 153, the House of Lords held (with the exception of Lord Bingham
of Cornhill, who adopted a narrower view) that the Human Rights Act
1998 can apply on an extra-territorial basis to the extent that signatory
states are required by Art.1 of the European Convention on Human Rights
(ECHR) to secure to everyone within their jurisdiction the protection
of Convention rights. Lord Rodger of Earlsferry, Baroness Hale, Lord
Carswell and Lord Brown of Eaton-under-Heywood concluded that five
of the six claimants failed in their attempts, based on the Art.2 right to life
* Solicitor-Advocate, London; Visiting Professor, Kings College London.
Forgery; Land registration; Right to respect for private and family life; Transfer of land
AND
CONTRIBUTORS
356
[Vol. 124
and s.6(1) of the Act, to obtain judicial review of the Secretary of States
refusal to hold an inquiry into the killing of their relatives by British
forces in Iraq; Lord Bingham concluded that all six claimants failed.
However, given that each judgment focused on two questionswhether
s.6(1) applies to acts of a UK public authority committed outside the
countrys territory; and if so whether the claimants relatives were within
the countrys jurisdiction for Art.1 purposes when they were killedAlSkeini contains important analyses of the operation of the Act and its
relationship with the Convention as well as of the arguably inconsistent
Court of Human Rights Art.1 case law. As such, the decision says as much
about the methodology of decision-making in Human Rights Act cases as
it does about the extra-territorial application of s.6(1) and Convention
rights.
The main judgments were given by Lord Bingham (with whose analysis
of s.6(1) Lord Brown partly agreed), Lord Rodger and Lord Brown.
Although Baroness Hale and Lord Carswell agreed with Lord Rodger
and Lord Brown, it is perhaps best to see Baroness Hale as specifically
supporting Lord Rodgers analysis of s.6(1) and Lord Browns analysis
of Art.1. Although Lord Bingham differed from Lord Rodger and Lord
Brown in his treatment of and conclusions concerning s.6(1), all three
treated the Act as providing the key to the role of Strasbourg case law at
domestic level, thus embodying a strongly dualistic approach.
Lord Binghams analysis rested on the view that the extent to which
Convention rights are protected in domestic law depended on the drafting
of the Act, echoing Re McKerr [2004] UKHL 12, [2004] 1 W.L.R. 807.
The courts initial focus had to be on the extent of the rights arising
under the Act, not those arising under the Convention (at [10]), while
Parliament intended the effect of the Act to be governed by its terms
and not, save by reference, the Convention (at [14]). A claim may
in some circumstances fall within the scope of the Convention but not
within the scope of the Act (at [4]), although not vice versa, and to be
successful it needed to fall within both. Lord Bingham could not discern
from the Acts drafting any clear indication that Parliament had intended
to trump the orthodox presumption that legislation does not extend outside
UK territory, and could find no support for such an inference in the
parliamentary debates preceding the Acts passage. The claimants were
also not assisted by Diplock L.J.s noted assertion from Salomon v
Commissioners of Customs and Excise [1967] 2 Q.B. 116 at 143144, that
where the terms of legislation bringing a treaty into domestic law were
unclear, the relevant treaty became relevant in interpreting the legislation:
for there had been no international law obligation to give effect to the
Convention in domestic law (see, e.g. James v United Kingdom (1986) 8
E.H.R.R. 123 at [84]; Observer and Guardian v United Kingdom (1991)
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14 E.H.R.R. 153 at [76]). In consequence, Lord Bingham concluded that

the Act had no extra-territorial application.
Lord Rodger similarly placed no reliance on relevant Parliamentary
debates, but unlike Lord Bingham concludedvia an analysis focusing
on the purposes of the Act in addition to its draftingthat s.6(1) applied
where a public authority acted outside the territory of the United Kingdom
but within its jurisdiction for Art.1 purposes. The presumption against
extra-territorial application was driven by practicality and concern for
international comity. States are bound in international law to respect one
anothers territorial sovereignty, so Parliament could be assumed not to
intend to legislate to regulate the conduct of British citizens overseas.
However, this did not prevent Parliament from doing so: the key question
was whether, on a fair interpretation, the statute in question is intended to
apply to [citizens] only in the United Kingdom (at [47]). It was therefore
necessary, when determining whether public authorities fell within s.6(1)
when acting abroad, to have regard to the overall nature and purpose
(at [52]) of the Act. Here, Lord Rodger observed that if the Acts central
purpose was to allow claimants to obtain remedies before domestic courts
rather than having to go to Strasbourg when Convention rights had been
breached (also advancing the right to an effective remedy guaranteed by
Art.13), it made sense to allow the Act extra-territorial application in line
with Art.1. It was also sensiblein the absence of any contrary indication
in the legislationto treat public authorities consistently whether they
carried out their functions at home or abroad. Furthermore, the provision
of remedies for actions overseas would not be offensive to the sovereignty
of other states. Turning to the nature of the Act, Lord Rodger pointed
out that there was no danger that extra-territorial application, if tied to
the drafting of the Act and to the Art.1 case law, could confer rights
on people all over the world with little or no real connexion with the
United Kingdom (at [55]). Under s.7(1), only victims (as defined in
Art.34 ECHR) of the unlawful actions of public authorities could bring
proceedings under s.6(1). To sue, a claimant would therefore first have to
be within the jurisdiction of the United Kingdom for the purposes of
Art.1. In consequence, while Lord Rodger interpreted s.6(1) more widely
than did Lord Bingham and reasoned in a more purposive fashion, his
judgment accorded an equally strong role to the Act as the key to the
domestic application of Convention rights, and was just as dualist in its
approach.
Lord Brown agreed with Lord Bingham that there was a distinction
between rights arising under the Convention and rights created by the
Act by reference to the Convention (at [134]), and that neither the text
of the Act nor statements made during its passage were sufficient to
rebut the presumption against extra-territorial application. Nonetheless,
he followed Lord Rodger in emphasising the importance of the object,
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subject-matter and history of this Act . . . its very purpose being to

ensure that . . . it would no longer be necessary for victims to complain
about alleged violations of the Convention internationally in Strasbourg
instead of domestically in the UK (at [138]). It was not therefore obvious
that Parliament intended to exclude claimants from the Acts protection
in cases where the Strasbourg case law recognised Convention rights
as having extra-territorial application. Furthermore, Lord Brown took a
different view from Lord Bingham concerning the relevance of Diplock
L.J.s assertion in Salomon, stating that while the United Kingdom had
undertaken no specific treaty obligation to incorporate the Convention
into domestic law, it was nonetheless obliged by Art.13 (enforceable
before the Strasbourg Court) to grant an effective remedy, an obligation
which would be breached if the Act was held not to apply to the sixth
claimants case. In consequence, s.6(1) applied on an extra-territorial basis
to the extent required by Art.1. However, Lord Brown was also clear
(supported by Baroness Hale) that domestic courts should not construe
Art.1 as reaching any further than was clearly specified in Court of Human
Rights case law. Lord Binghams suggestion in R. (on the application of
Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 A.C. 323 at [20]
that the duty of national courts was to keep pace with the Strasbourg
jurisprudence, no more, but certainly no less, could equally well have
ended no less, but certainly no more: for, while aggrieved individuals
could always complain to the Strasbourg Court if their Convention rights
were interpreted too narrowly by national courts, public authorities could
not do so where an unduly broad interpretation was adopted.
It followed from Lord Binghams treatment of s.6(1) that analysis of
the Art.1 case law was unnecessary. Whether the claimants deceased
relatives fell within the United Kingdoms jurisdiction under Art.1 was
a matter for the Court of Human Rights. Lord Rodger and Lord Brown,
by contrast, gave detailed consideration to the jurisdiction question. As
Lord Rodger noted, the problem which the House ha[d] to face under
this heading was quite squarely . . . that the judgments and decisions
of the European Court do not speak with one voice . . . and so present
considerable difficulties for national courts (at [67]). Both adopted a
narrow view of the ambit of state jurisdiction under Art.1, and in doing
so arguably underlined the dualist nature of their approach.
The key inconsistencies in the Strasbourg case law are between
Bankovic v United Kingdom (2007) 44 E.H.R.R. SE5, decided in 2001
and concerning Britains responsibility under Art.2 for deaths resulting
from the countrys bombing of former Yugoslavia, and later decisions. In
Bankovic, the Grand Chamber stated that Art.1 must be considered to
reflect [an] ordinary and essentially territorial notion of jurisdiction (at
[59]), that only in exceptional cases could acts of the contracting states
performed, or producing effects, outside their territories . . . constitute an
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exercise of jurisdiction by them (at [65]), and that special justification

in the particular circumstances of each case (at [59]) was necessary
to bring an exceptional situation within Art.1. Recognised exceptions
included cases where a state had effective control of territory and its
inhabitants due to military occupation or through the consent, invitation or
acquiescence of the government of that territory (Cyprus v Turkey (2002)
35 E.H.R.R. 30), and the activities of diplomatic or consular agents abroad.
The Grand Chamber accepted that bombing Yugoslavia did not fall within
the United Kingdoms jurisdiction, given that the Convention operated in
an essentially regional context and notably in the legal space . . . of the
contracting states (at [78]), Yugoslavia falling outside that space.
However, in Issa v Turkey (2005) 41 E.H.R.R. 27, the Court reiterated
the Bankovic formula but did not exclude the possibility that, as a
consequence of extensive cross-border raids into Iraq by Turkish troops
over a six week period, Turkey could be considered to have exercised,
temporarily, effective overall control of a particular portion of the territory
of northern Iraq (at [74]), causing the troops killing of a group of
Iraqis to fall within Turkeys jurisdiction. The court reiteratedbuilding
on Cyprus v Turkeythat it was not necessary, in order for a state to
have effective control, for it actually to exercise detailed control over
the policies and actions of the authorities in the area situated outside its
national territory, since even overall control of the area may engage [its]
responsibility (at [70]). A state could exercise authority and control
over another states territory through its agents operatingwhether
lawfully or unlawfullyin the latter State . . .. Accountability in such
situations stems from the fact that [Art.1] cannot be interpreted so as
to allow a state party to perpetrate violations of the Convention on
the territory of another state, which it could not perpetrate on its own
territory (at [71]). While Bankovic and Issa both employed a territorial
notion of jurisdiction, the application of that notion in Issa appeared to
be considerably more generous than that in Bankovic.
Lord Rodger and Lord Brown treated Bankovic as the stronger
authority. Lord Rodger declared Issa to be irreconcilable with Bankovic.
The Court of Human Rights had not explained how its statement in Issa
concerning authority and control fitted in with Bankovic, not least since
it appeared to focus on the activity of the contracting state, rather than
on the requirement that the victim should be within its jurisdiction (at
[75]). The Issa courts more generous territorial notion of jurisdiction
constituted another major unresolved difficulty (at [76]) when compared
with the Grand Chambers essentially regional characterisation of the
Convention in Bankovic. Furthermore, the Issa notion of temporary
effective overall control of an area did not provide workable guidance
(at [80]) for national courts. Lord Brown suggested that in so far as the
authority and control statement in Issa referred to cases which fell within
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one of the exceptions recognised in Bankovic, it was unexceptionable.

However, there was no basis for adopting a wider notion of jurisdiction:
It is one thing to recognise as exceptional the specific narrow categories
of cases set out in Bankovic, but quite another to accept that whenever
a contracting state acts (militarily or otherwise) through its agents abroad,
those affected by such activities fall within its Article 1 jurisdiction (at
[127]). Such a contention would make nonsense of the notion that the
Convention operated in an essentially regional context.
Lord Rodger also invoked the Bankovic characterisation of the Convention as essentially regional in suggesting that it may reflect the values
of the contracting states, but does not reflect those in many other parts
of the world. So the idea that the United Kingdom was obliged to secure
observance of all the [Convention] rights and freedoms . . . in the utterly
different society of southern Iraq is manifestly absurd (at [78]). Furthermore, the obligation arising under Art.1 could arise only where the
contracting state has such effective control of the territory of another state
that it could secure to everyone in the territory all the [Convention] rights
and freedoms, as required by Art.1 (at [79])a point reiterated by Lord
Brown, who asserted that Issa should not be read as detracting in any
way from the clearand clearly restrictiveapproach to article 1 jurisdiction adopted in Bankovic (at [131]). Lord Rodger and Lord Brown
thus concluded that the first five claimants in Al-Skeini, whose relatives
had been killed by troops operating in the field or on patrol, had no claim
under Art.1, while the case of the sixth claimant, whose relative had died
in British military custody, should be remitted to the Divisional Court
(Lord Brown drawing an analogy to the diplomatic or consular exception
recognised in Bankovic).
Their Lordships treatment of Issa may not resolve, at national level, the
problematical relationship between the Art.1 cases. Both Lord Rodger and
Lord Brown stressed that, unlike Bankovic, Issa was not a decision of the
Grand Chamber and so carried less weight. However, the relative weight
of the decisions may in fact be harder to determine given that Bankovic
merely concerned admissibility rather thanas in Issathe actual merits.
As is evident from the Al-Skeini judgments, alternative grounds for
preferring Bankovic would need either to be policy-driven or based on
the nature of the Convention. However, given that Lord Rodger justified
his wide interpretation of s.6(1) on the basis that it promoted consistency
in public authority liability and did not undermine national sovereignty,
one might reasonably ask how he could simultaneously deploy a narrow
approach to Art.1. The answer, presumably, lies in the strongly dualist
nature of his (and the other Law Lords) approach: if Convention rights
differ from rights brought into domestic law under the Act, then different
policy arguments can plausibly apply to each group. Given the many
competing views in play concerning the constitutional status and role
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of the Human Rights Act, however, an explicit judicial defence of this

positionnot offered in Al-Skeini may yet be needed.
NICHOLAS BAMFORTH.*
MARRYING FINANCIAL PROVISION AND INSOLVENCY AVOIDANCE
AT the beginning of his judgment in Haines v Hill [2007] EWCA Civ
1284; [2007] 3 F.C.R. 785 Thorpe L.J. said (at [43]):
There is an obvious tension between the statutory scheme for the
protection of a bankrupts creditors and the statutory scheme for
the financial protection of the bankrupts former wife and child.
Bankruptcy Acts and Matrimonial Causes Acts may be said to
compete for shares in the fund which will always be incapable of
satisfying both. Clearly if the act of bankruptcy precedes an order
made under the Matrimonial Causes Act the legal and practical
outcome is straightforward. Difficulties arise when the order under
the Matrimonial Causes Act precedes the bankruptcy.
The competition between the bankrupts creditors and his former wife and
child came about in this case in the following circumstances. Upon divorce
the husband was ordered to transfer his half share in a farm to the wife.
About three months later the husband was adjudicated bankrupt on his
own petition. Just over a year later the husbands trustees in bankruptcy
applied to set aside the transfer on the ground that it was a transaction at
an undervalue under s.339 of the Insolvency Act 1986. The District Judge
dismissed the trustees application but H.H. Judge Pelling Q.C., sitting as
a Deputy High Court Judge, allowed their appeal. The Court of Appeal
correctly restored the District Judges decision.
Section 339 allows for the setting aside of transactions entered into
by a bankrupt prior to entering bankruptcy where they are made for
no consideration or a consideration significantly less than that provided.
The period of time before bankruptcy (the relevant time) during which
a transaction is potentially vulnerable is five years (s.341(1)(a)). Under
s.341(2) it has to be shown that the bankrupt was insolvent at the time
of the transaction or became so as a result of it, unless the transaction
occurred within two years of entering bankruptcy. Also under s.341(2)
the bankrupt will be rebuttably presumed insolvent at the time of the
transaction where it is in favour of an associate. Section 435(2)(a) includes
a spouse within the definition of associate although it is not completely
clear whether former spouse comes within this definition. There are
obviously strong arguments that in the context of challenging financial
* The Queens College, Oxford.
Extraterritoriality; Human rights; Iraq; Public authorities; Right to life; Territorial application;
Yugoslavia
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provision orders on divorce as transactions at an undervalue the former

spouse should be treated as an associate. One other statutory provision
that must be referred to at this stage is s.39 of the Matrimonial Causes
Act 1973, which provides that the fact that a transfer of property is made
to comply with a property adjustment order does not prevent it being a
transaction at an undervalue or a preference under s.340.
H.H. Judge Pelling Q.C., founding himself on several decisions about
the meaning of consideration in entirely different contexts, had decided
that the property adjustment order made in this case was a transaction
at an undervalue because the wife had provided no consideration for
it. He rejected as inapplicable two previous decisions on the effect of
legislative provisions that preceded s.339. Re Pope [1908] 2 K.B. 169
concerned a post-nuptial settlement made by a husband in favour of his
wife and children within two years of his bankruptcy. Section 47 of the
Bankruptcy Act 1883 made such a provision void against the trustee in
bankruptcy unless made . . . in favour of a purchaser . . . and for valuable
consideration. A majority of the Court of Appeal held that the wife was
a purchaser for valuable consideration because she promised in exchange
for the settlement to refrain from taking proceedings for dissolution of
marriage and a permanent maintenance allowance on the ground of the
husbands past misconduct. Re Abbott [1983] Ch. 45 concerned a property
adjustment order made in favour of a wife upon divorce. The claim was
compromised and embodied in a court order. The husbands trustee in
bankruptcy challenged it under s.42 of the Bankruptcy Act 1914 which
invalidated settlements made by bankrupts within two years of bankruptcy
unless made in favour of a purchaser in good faith and for valuable
consideration. Peter Gibson J. (as he then was) held that a bona fide
claim for ancillary relief upon divorce satisfied this test. Judge Pelling
Q.C. regarded these decisions as no guide to s.339 in part because of the
advice of Millett J. (as he then was) in Re MC Bacon Ltd [1990] B.C.L.C.
324 that decisions under previous legislation should not be cited in cases
concerning the avoidance provisions of the Insolvency Act 1986.
Judge Pelling Q.C.s decision was clearly wrong because it produced the
absurd result that every property adjustment order made within five years
of the transferors bankruptcy was liable to be voided. This consequence
follows from a holding that the wife provided no consideration for the
transfer. There was no issue in the case as to whether the consideration she
provided was significantly less than that received because, as Thorpe
L.J. pointed out, this case was a very ordinary one and there was no
evidence of any overvalue in the calculation of the wifes share in the
fund.
Despite this eminently sensible result and its accompanying relief of the
consternation in the profession caused by Judge Pelling Q.C.s decision
(see [2007] EWCA Civ 1284; [2007] 3 F.C.R. 785 at [50] per Thorpe L.J.),
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all tension between insolvency and matrimonial legislation has not been
relieved. This is because s.339 is different from its predecessors in one
very significant way. Section 47 of the 1883 Act and s.42 of the 1914 Act
provided that good faith valuable consideration was a complete defence
to the trustees claim. Section 339 requires the provision of consideration
which is not significantly less than comes from the transferor. The Court
of Appeal held that the property adjustment order in Haines v Hill was
unimpeachable because there was no evidence of any collusion between
the parties. This would negative any challenge to a property adjustment
order made under s.423 (transactions defrauding creditors) but is not a
complete defence under s.339 because this provision does not require
proof of any mens rea. In light of s.39 of the Matrimonial Causes Act
1973 it cannot be argued that s.339 proceedings are barred on the ground
of collateral challenge to the decision of the family court, whether made
after a contested hearing or door of the court settlement. (This was one of
the grounds barring a negligence action against a barrister who advised
on the terms of an ancillary relief settlement made an order of the court
in Kelley v Corston [1998] Q.B. 686). Realistically there is no prospect
of a successful s.339 challenge to a property adjustment order after what
Thorpe L.J. called a hard fought trial ([2007] EWCA Civ 1284; [2007]
3 F.C.R. 785 at [48]). But this is not because there is no collusion between
the parties; it is because the judge may be presumed to have given careful
thought to the fairness of the order. It could well be different where the
parties settle the matrimonial proceedings and then submit a draft order
to the judge for approval. Although Thorpe L.J. was at pains to point out
that the judges role in such situations was quasi-inquisitorial, required an
investigation of what is fair to the parties, and in rare cases could result in
a decision to order more or less ([2007] EWCA Civ 1284; [2007] 3 F.C.R.
785 at [54]), nothing like as much thought will be given by the judge to the
balance of consideration provided in this case. It is quite conceivable that
without any collusion between the parties the consideration provided by
the recipient of a property adjustment order may come to significantly
less than what she receives. This is especially so in the big money
divorce cases (see Miller v Miller; McFarlane v McFarlane [2006] UKHL
24; [2006] 2 A.C. 618) where the principles involved and their application
still require much refinement. Adequacy of consideration generally does
not matter but it is key to the statutory test in these situations. Given the
need to protect the recipients legitimate expectations in the security of
her receipt it is not thought likely that a settlement given judicial approval
could often be attacked under s.339, but the door appears to be open to
this possibility. After the abolition of advocates immunity in Arthur JS
Hall & Co v Simons [2002] 1 A.C. 615, another solution to this problem
may be found in an action brought against the adviser responsible for the
unbalanced settlement on behalf of the bankrupts creditors. That would
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not involve taking anything back from the innocent recipient but would
compensate the true victims and make the person truly responsible for
their loss pay for it.
DAVID CAPPER.*
FOAKES V BEER : REFORM OF COMMON LAW AT THE EXPENSE OF EQUITY
THE House of Lords decision in Foakes v Beer (1884) L.R. 9 App. Cas.
605 elevated to the status of a common law rule an ancient obiter dictum
by Sir Edward Coke in Pinnells Case (1602) 5 Co. Rep. 117a which states
that absent agreement under seal or fresh consideration acceptance by the
creditor of part payment of a debt does not in law discharge the whole
debt. Pinnells Case suggested that a common law defence of accord and
satisfaction could not be pleaded on part payment of a debt because it
appears to the Judges that by no possibility a lesser sum can be satisfaction
to the plaintiff for a greater sum. Even as the House of Lords reluctantly
affirmed the rule on the basis of its respectable old age, powerful dissent
was voiced by Lord Blackburn who criticised the courts for failing to
recognise the benefit to the creditor of prompt if only partial payment.
Since then, the rule seems to have been criticised in almost every case in
which it was applied and the modern approach of the courts is one of reluctant application due to compulsion of authority (see, e.g. Re Selectmove
Ltd [1995] 1 W.L.R. 474). Lord Denning, emboldened by a recommendation for the abolition of the rule made by Lord Wrights Law Revision
Committee in 1937 (Sixth Interim Report (Statute of Frauds and the Doctrine of Consideration, Cmnd 5449), attempted to create a way round it on
the basis of what came to be known as promissory estoppel. His judgment
in Central London Property Trust v High Trees House [1947] K.B. 130
opened the door to applying the equitable doctrine in Hughes v Metropolitan Railway Co (187677) L.R. 2 App. Cas. 439 to estop the creditor from
attempting to recover the unpaid part of the debt after the agreed part had
been paid by the debtor. In D & C Builders v Rees [1966] 2 Q.B. 617
Lord Denning referred to such application of the doctrine as an already
established practice, and stated a substantive rule which barred recovery
by the creditor in the face of an executed agreement to accept part of the
debt. Now, in Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ
1329 the Court of Appeal has sought to apply the proposition in Rees to
override definitively the notoriously rigid and artificial common law rule
by putting forward an equally rigid and artificial rule to the opposite effect.
On the facts of the case, Mr Collier, jointly with two partners, took out
a loan from Wrights. Dealings between the parties resulted in a consent
* School of Law, Queens University Belfast.
Financial provision; Matrimonial property; Setting aside; Transactions at an undervalue; Transfer
of property orders
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judgment whereby the three partners were jointly liable to pay the debt
by monthly instalments. The debt was initially serviced out of a joint
partnership account, and after the partnership came to an end each debtor
was servicing his share of the debt individually. After the other two debtors
stopped making the payments, Mr Collier had a meeting with his creditor.
There was a conflict of evidence as to what was said at the meeting but
it was Mr Colliers case that in response to his query he was told by
Wrights to continue making his payments as before and that they would
chase the other two debtors. Five years later, after Mr Collier had made
the payments which totalled exactly one-third of the debt, Wrights served
on him a statutory demand for the balance of the debt. He set up the
meeting five years earlier in defence, claiming that what he was then told
amounted to a promise on the part of Wrights to treat him as a several
debtor in relation to one-third of the debt. Now that he had paid the onethird part of the debt, he argued, his obligation had been satisfied and he
was not liable for the outstanding balance.
Since the case originated as an application by Mr Collier under the
Insolvency Rules to set aside the statutory demand, the court only had to
decide whether Mr Collier succeeded in showing that there was a genuine
triable issue in which case the court would set aside the demand. The trial
judge dismissed the application. He held that although there was a genuine
triable issue as to whether the alleged promise by Wrights had been made
in terms contended for, it was beyond any issue that such promise would
not be enforceable at law, for reason of absence of consideration, nor
in equity, for reason of absence of change of position. The Court of
Appeal upheld the judgment below on the first point, holding that no
consideration was given by Mr Collier to Wrights to support their alleged
promise. Attempts by counsel for Mr Collier to find consideration in the
form of Mr Collier ceasing to be a joint debtor were rejected. It was said
(at [27(iii)]) that Mr Collier did not communicate any intention to release
the benefits that he had as a joint debtor and therefore no meeting of
minds can be established on these matters. Further, the supposed loss
of benefit came about as legal consequences that attached to the offer
by Wrights and flowed from it, so there was no consideration moving
from Mr Collier. (It must be said that at least on the part concerning
absence of communication of intention the Court of Appeal was rather
less generous to Mr Collier than it had been only three weeks earlier
to the appellants in Pitts v Jones [2007] EWCA Civ 1301. There the
Court of Appeal found consideration to have been given by shareholder
appellants in the form of attending a meeting of shareholders convened
at short notice; consent to short notice and attendance were held to be
good consideration notwithstanding the fact that the appellants did not
consciously realise that by signing [the consents] they were subjecting
themselves to a detriment and were giving consideration (at [18]).)
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The Court of Appeal reversed the judgment below on the promissory

estoppel point. Restating Lord Dennings words from Rees, Arden L.J.
pronounced (at [42]) nothing less than an absolute rule that once a debtors
offer to pay a part of the debt is voluntarily accepted by the creditor and
in reliance on the creditors acceptance the debtor pays the agreed part
of the debt, the promissory estoppel will operate to bind the creditor
to accept the part payment in satisfaction of the whole debt which will
then be extinguished. On the same authority, Arden L.J. also held that
payment of the part of the debt constitutes sufficient reliance to found the
estoppel. Once the amount is paid, the equity is created and nothing more
is required. For the creditor then to resile from the agreement would
of itself be inequitable (at [42]). Therefore, the issue of whether or not
there was a promise made by Wrights as argued by Mr Collier was a
genuine triable issue because were the promise to be shown, the rule
would operate without more to give relief. Having so stated the rule, her
Ladyship finished off her judgment to the effect that the reform called
for by Lord Wrights Committee in 1937 and set in motion by Lord
Dennings brilliant dictum in High Trees was now complete. A sceptical
Longmore L.J., however, showed much less enthusiasm over the fashion
in which Arden L.J. proposed to make legal history by completing the long
calledfor reform of the rule in Foakes. He agreed with Arden L.J. on the
point of reliance (at [47]) which for him, though not established on the
facts of Collier, seemed to have been decided as a matter of law by Rees.
He said however that, although arguable, it was not a foregone conclusion
that it would have been inequitable for Wrights to resile from the alleged
agreement and that this was an issue for the trial. He also stressed the
need to examine the exchanges of the parties in order to discover whether
they did result in a true accord for the complete discharge of the debt (as
opposed to an accord for temporarily suspending enforcement), adding
that if the High Trees jurisprudence were to have the result advocated for
by Arden L.J., it is perhaps all the more important that agreements which
are said to forgo a creditors rights on a permanent basis should not be
too benevolently construed (at [48]).
The modern formulation of the rule offered by Arden L.J. is striking
in that, although put forward as application of an equitable doctrine, it is
based entirely on a straightforward offer and acceptance approach. The
debtor tenders part payment which the creditor agrees to accept. Payment
by the debtor then of itself constitutes reliance and crystallises the equity
so that it is of itself inequitable for the creditor to resile from the
agreement. Acceptance as a statement of authority of Lord Dennings
obiter proposition in Rees that payment of the agreed part of the debt
constitutes reliance makes redundant any element of, as Longmore L.J.
put it (at [46]), meaningful reliance, and forces the equitable doctrine
to operate as an automatic consequence of an offer and acceptance. The
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requirement to show substantive inequitability is treated as satisfied of

itself and any further element of unconscionability which alone could
justify equitys intervention is openly dismissed. Equitable doctrine is used
with the sole purpose of getting the inconvenient rule in Foakes out of the
way; there is really no investigation whether its intervention is justified
on its own terms. (This is very unlike the approach of Lord Denning
himself who would famously select his law to give effect to the practical
justice of the case. In Rees, no sooner had Lord Denning formulated the
propositions on which Arden L.J. relied than he disapplied them all in
favour of the builder creditors who had been coerced into accepting part
payment.) In the end what is left is a complete and executed agreement
in which the lender is content to accept the practical benefit of prompt
recovery of part of a debt and which the courts agree to enforce despite
their insistence that no consideration supports the agreement. That may
indeed get over the Foakes stumbling block, but an attempt to support this
result by the reasoning employed in Collier appears rather less satisfactory
than an outright abolition of the rule in Foakes, because of the violence
that it does to the equitable doctrine developed in Hughes v Metropolitan
Railway Co (187677) L.R. 2 App. Cas. 439.
The decision in Hughes is a classic case of operation of the equitable
doctrine. Mr Hughes was not allowed to insist on his right at law to forfeit
the lease for breach of a repair covenant because of an indication he had
given (or rather was taken to have given) to the railway that the operation
of the covenant would be suspended while negotiation went on. To the
extent that the railway did not carry repairs in reliance on that indication
and thereby laid itself open to forfeiture, it was unconscionable for Mr
Hughes to forfeit. The decision was not reached on the basis of operation
of hard and fast rules; it was the overall effect of the conduct of the
parties in the factual circumstances of the case that gave rise to an equity
in favour of the lessee. Collier replaces this approach with a rigid rule
which drags equity to intervene in circumstances where there is nothing
really to warrant that intervention other than the openly proclaimed desire
to escape the application of the rule in Foakes v Beer. Both law and equity
insist that they do not enforce gratuitous promises. In the case of the law
the convention is to accept the fiction of clothing bare promises with a fig
leaf of nominal consideration. Collier is the beginning of the reduction of
the equitable doctrine to the same fiction-based position. It is not axiomatic
that the case of agreement to accept part payment of itself falls within the
jurisdiction of equity, certainly not if the existing obligation of the debtor
to pay the debt is not to be overlooked. To give the debtor special credit
for making payment by treating such payment as a change of position
in reliance on the creditors promise is equivalent to saying that absent
such promise the debtor is free to decide whether he pays or not. Absent
a genuine change of position (the need for which would be obviated by
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Arden L.J. in Collier on the basis of Lord Dennings statement in Rees),

if the creditor resiles from his promise, the debtor is not affected beyond
a certain frustration to his expectations. That has never been sufficient
to found an equitable remedy. The traditional view is that a detrimental
change of position by the debtor in reliance on the creditors promise is
required to satisfy the test for equitable relief. This was the preferred view
of Longmore L.J. in Collier which he felt was superseded by Rees. This
was the view of Danckwerts L.J. in Rees itself when he said that absent
detrimental alteration of position by the debtors it was not inequitable
for the creditor to insist on payment of the balance after accepting part
payment and giving receipt for it in completion of the account. This
view was the basis for a line of cases to which Lord St Leonards referred
to in his dissenting judgment in Jordan v Money (1854) 5 H.L. Cas. 185.
In those cases the equity in favour of those who sought it was no less
than irresistible, since there was a genuine change of position on the faith
of a promise, such as marriage settlement of property in reliance on a
promise not to enforce a debt against the groom, or expenditure of funds
on the land in reliance on a promise of a grant of lease of that land. The
proposition Lord St Leonards was advancing with support of those cases
was that equity should give relief for change of position notwithstanding
the technical distinction that a statement which brought about the change
was not a representation of fact but a promise of future conduct; although
he was overruled in Jordan, the proposition later found vindication in
the Hughes doctrine. Collier should not be allowed to throw away the
requirement of a genuine change of position which lies at the heart of that
doctrine.
Even as the House of Lords delivered its decision in Foakes, it
openly acknowledged that the rule was liable to produce injustice and
that judges were anxious to relieve its effect by finding all sorts of
artificial consideration (per Lord Fitzgerald). Collier is a case where,
despite all attempts, no such consideration could be found, and the court
contemplated giving equitable relief in a manner which accepts a similar
degree of artificiality. This is not a welcome development. Longmore L.J.
was clearly uneasy about it and his reservations give ground for resisting
further erosion of equitable principles by reference to the authority of
Collier. Equity gives relief where justice requires relief to be given but
none can be obtained under the common law. It is no function of equity
to lend its doctrines to plug holes in the common law.
ALEXANDER TRUKHTANOV.*
* Solicitor, London.
Common law; Consideration; Debts; Promises; Promissory estoppel
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APPARENT GIFTS: RE-EXAMINING THE EQUITABLE PRESUMPTIONS

IT is trite law that apparent gifts trigger one of two equitable presumptionseither the presumption of resulting trust or the presumption of
advancement. It was suggested in these pages ((2007) 123 L.Q.R. 347)
that the two main difficulties that modern courts face is that of explaining
the continued relevance of a counterintuitive presumption of resulting trust
and of fashioning appropriate presumptions of advancement to serve as
a counterbalance in an increasingly heterogeneous society. Despite being
judicially questioned by senior members of the Bench in both Australia
(Calverley v Green (1984) 155 C.L.R. 242 at 248 per Gibbs C.J., at
264265 per Murphy J. and at 265266 per Deane J.; Nelson v Nelson
(1995) 184 C.L.R. 538 at 602 per McHugh J.) and Canada (Pecore v
Pecore (2007) 279 D.L.R. (4th) 513 at 539541 per Abella J.), the courts
seem reluctant to abandon the presumption of resulting trust. In Lau Siew
Kim v Terence Yeo Guan Chye [2007] SGCA 54; [2008] 2 S.L.R. 108,
the Singapore Court of Appeal agreed that the presumption of resulting
trust is out of step with reality and the expectations of the public, but
felt obliged to retain it. It has long been considered that an outright judicial abolition of the presumption of resulting trust would be too radical a
step for the courts (Calverley v Green (1984) 155 C.L.R. 242 at 266 per
Deane J.). However, the Singapore Court of Appeal considered that the
more moderate suggestion ((2007) 123 L.Q.R. 347) that the presumption
of resulting trust could be downgraded from a presumption of law to a discretionary presumption of fact was itself too radical. The court preferred
instead to accord varying weight to the presumption of resulting trust
depending on the particular context (at [52]) and treat the injustice which
would result from a mechanical application of the presumption of resulting
trust with the antidote of the presumption of advancement (at [56]).
Less than a year ago, in Low Gim Siah v Low Geok Khim [2007] 1 S.L.R.
795, the Singapore Court of Appeal appeared to favour tradition over
reform (see McInnes (2007) 123 L.Q.R. 528). A differently constituted
Court of Appeal has since clarified the position. Lau Siew Kim v Terence
Yeo Guan Chye [2007] SGCA 54 is, like many cases involving the
presumptions, a curious case. It involved a dispute over the estate of
a deceased person, in this case one Yeo Hock Seng. Thrice married, Yeo
Hock Seng died intestate as a result of the statutory revocation of his
will by his third marriage. The statutory revocation, via s.13(1) of the
Wills Act (Cap. 352, 1996 Rev. Ed.), operated strictly even though he
had named his third wife, Lau Siew Kim, as sole beneficiary under his
revoked will, executed before his marriage. As the Court of Appeal noted,
this ironically defeated the objective underpinning s.13(1). This allowed
his two estranged sons, Terence Yeo and Theodore Yeo, both from his
first marriage, to claim an interest in his estate via intestacy. The dispute
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was concerned with whether two pieces of real estate, both held in the
joint names of Yeo Hock Seng and Lau Siew Kim, formed part of his
estate. His sons argued that although the two held the properties jointly
at law, their father held a larger share of both properties in equity as a
result of the presumption of resulting trust because Yeo Hock Seng and
Lau Siew Kim had contributed unequally to their purchase. Seizing on
comments by the Court of Appeal in Low Gim Siah, counsel sought to
suggest that any presumption of advancement which arose on the facts
was a weak one and easily rebutted because Lau Siew Kim had been
financially independent. It was further argued that the properties had been
put in the couples joint names merely for commercial convenienceas
involving the younger Lau Siew Kim in the transaction permitted the
couple to obtain favourable credit terms.
In a wide-ranging judgment, the Singapore Court of Appeal sought to
clarify the modern role of both the presumptions of resulting trust and
advancement. At a fundamental level, the court agreed with Chambers,
Resulting Trusts (1997) at p.32, that resulting trusts respond, not to an
intention to create a trust, presumed or imputed, but to a lack of intention
to benefit the donee (at [35]). In doing so, however, they do not seem to
have endorsed Chambers wider thesis that the resulting trust is therefore
an appropriate vehicle of proprietary restitution of unjust enrichment. This
understanding of how resulting trusts operate is very similar to that of
Lord Milletts in Air Jamaica Ltd v Charlton [1999] 1 W.L.R. 1399, PC.
However, without supporting Chambers wider thesis, which was built
upon the similar suggestion by the late Professor Birks in Goldstein (ed.),
Equity and Contemporary Legal Developments (1992) at pp.335373, the
latter having been rejected in Westdeutsche Landesbank Girozentrale v
Islington LBC [1996] A.C. 669, this new understanding of the operation
of the resulting trust is not of dramatic practical significance.
The court also disagreed with the view expressed by the Supreme Court
of Canada in Pecore v Pecore (noted by McInnes (2007) 123 L.Q.R. 528)
that any given set of facts would only trigger one or the other presumption
(at [56][57]). According to this view, if the relationship between the
parties fell within the categories of the presumption of advancement, the
presumption of advancement would apply from the outset. Otherwise, the
presumption of resulting trust would apply. The court considered that,
instead of displacing the presumption of resulting trust from the outset,
the presumption of advancement operated to remedy an unjust operation
of the presumption of resulting trust, which must first be found to apply.
Assuming this view to be preferable, it is difficult to see what practical
difference follows and it is not self-evident why the court felt obliged to
labour the point.
At a conceptual level, Lau Siew Kim departs from the view expressed in
Low Gim Siah that the presumption of advancement responds to a moral or
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Notes
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equitable obligation on the part of a husband or father to advance his wife

or child respectively. Although the obligation view of the presumption
of advancement was not rejected, it was considered to co-exist with the
view that the presumption serves to deduce the intentions of the donor on
the basis of inherent probabilities (at [78]). This vacillation between the
two different rationales of the presumption of resulting trust by the court
vindicates Freedmans view in (2006) 25 E.T.P.J. 174 at 190 that the
rationale of the advancement rule is somewhat difficult to pin down.
By tying the presumption of advancement at least in part to inherent
probabilities as to a donors intentions, the court acknowledged that the
presumptions had to be refined to respond to changes in the social fabric.
It agreed, therefore, that in the modern context, the presumption of
advancement applied to gratuitous transfers from either parent to a
child and not simply from father to child, following the lead of the
Australian and Canadian courts. However, it disagreed with the view
of the majority of the Supreme Court of Canada in Pecore v Pecore
that the presumption of advancement did not apply to cases of adult
children. The Singapore Court of Appeal was also steadfastly conservative
as far as the presumption of advancement from husband to wife was
concerned. Although they agreed with the extension of the presumption of
advancement to couples engaged to be married, following Moate v Moate
[1948] 2 All E.R. 486 and Wirth v Wirth (1956) 98 C.L.R. 228, they felt
unable to extend the presumption to cohabitees (at [74]). It was stressed
that the strength of both the presumption of resulting trust (at [52][55])
and that of advancement (at [78]) varied with the facts. It was also clarified
that although financial dependence was relevant to the strength of the
latter presumption, it was but one factor to be considered by the court.
Whereas financial dependence, together with a legal, moral or other duty,
informed the court as to the nature of the relationship between the
parties, the state of the parties relationship (whether the parties were
close and caring or merely in a relationship of formal convenience) was
also relevant (at [78]).
This view of the law poses a number of difficulties. First, it is
difficult to grasp the distinction between the nature and the state
of a relationship beyond the simple point that most relationships that
may trigger a presumption of advancement are complex and multifaceted
with the result that all aspects of the relationship must be considered to
ascertain the strength of the presumption. It does not seem helpful to
divide the various aspects of a relationship between the state and the
nature of a relationship.
Secondly, by ascribing two very different rationales to the presumption
of advancement, the Singapore Court of Appeal sets the stage for the
presumption of advancement to be pulled in two opposing directions
by the two in some cases. For example, should the presumption of
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advancement be regarded as strong in the case of an abusive father

with a paraplegic and dependent child who is a minor? The obligation
aspect of the presumption suggests that it should whereas the inherent
probabilities aspect of the presumption suggests that it should not. Which
aspect of the rule is to prevail? One possible view is that the obligation
rationale of the presumption of advancement is itself merely one aspect
of the inherent probabilities rationale of the presumption in that the
law presumes that people are inherently more likely to perform their
obligations than not. However, neither Lau Siew Kim nor any of the cases
emphasising the obligations aspect of the presumption of advancement
explicitly support this view.
Thirdly, whilst supporting the presumption of resulting trust upon the
basis that it is well-entrenched may not ultimately be convincing to the
man on the Clapham omnibus, the courts have almost certainly set upon
themselves an impossible task in attempting to fashion acceptable limits
to the presumption of advancement. As previously noted in these pages
((2007) 123 L.Q.R. 347 at 350), societies are becoming increasingly
diverse and it is increasingly difficult to appeal to any norms of behaviour
in particular relationships upon which a presumption of advancement is to
operate, a view accepted by the Singapore court (at [50]). It must now be
increasingly difficult for the courts to discern which views are sufficiently
predominant as to justify the judicial imposition of a particular brand of
presumption of advancement, especially since the courts do not require
evidence of social norms to be presented to them. It is perhaps telling
that whereas the Court of Appeal in Lau Siew Kim commented on the
continued relevance of the presumption of advancement from husband to
wife by appealing to the perceived strength of the spousal relationship,
the logical step of extending the presumption of advancement to apparent
gifts from a wife to her husband was not taken.
The appeal to modifying and extending the categories of relationship
to which the presumption of advancement applies also suggests that this
patchwork remedying of the presumption of advancement is unsustainable.
The social climate does not change suddenly and abruptly but incrementally over time. Furthermore, the changes do not equally pervade all
branches of society. Yet any presumption crafted by the courts must apply
universally to all cases. It is not easy to comprehend why the same presumption should apply to married couples in their 20s as much as those
in their 40s or even their 80s or 90s. In the circumstances, it may be that
if the courts are minded to retain the presumption of resulting trust in
its full vigour, they ought to accept that it is often inappropriate in the
circumstances, regardless of the relationship between donor and donee.
This is equally true of any presumption of advancement, however carefully crafted. It may therefore be preferable for the retained presumption
of resulting trust to be rebutted on the particular facts of each case rather
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than encourage creative lawyers to bicker over the precise ambits of the
presumption of advancement. No great advantage seems to come from
operating a complex regime of twin interacting equitable presumptions
since most cases will almost inevitably be decided upon their facts.
A final point of note concerns the resolution of the case. Quite apart
from considering the loving relationship between the parties, the Singapore
Court of Appeal considered that whereas the presumption of advancement
from Yeo Hock Seng to Lau Siew Kim may have been rebutted as to the
life interest, it clearly was not rebutted as to the remainder. The case
therefore mirrors the Canadian case of Pecore v Pecore in result and
confirms that the evidence may rebut the relevant presumptions only
in part. It is pertinent that although the scope of the presumption of
advancement featured prominently in both cases, both cases would in
all likelihood have been decided in exactly the same fashion whether the
presumption applied (as it did in Lau Siew Kim) or not (as was the case
in Pecore v Pecore according to the majority).
It has probably been implicitly accepted as much for some time now
but Lau Siew Kim helpfully articulates that, as much as the strength of
a presumption of resulting trust depends on the facts and circumstances
giving rise to it, so too the strength of a presumption of advancement. It
is perhaps more accurate to suggest that both presumptions are themselves
very weak, but that the facts of a particular case may sometimes support,
rather than rebut, the relevant presumption. Inasmuch as both equitable
presumptions are to be retained, there will always be room for argument
as to whether the courts have accurately delimited the scope of the
presumption of advancement. However, as long as the courts feel obliged
to begin their analysis with these equitable presumptions, these difficulties
will always remain. It is by now probably a forlorn hope that the courts
will abandon the equitable presumptions in favour of making a finding of
fact on the evidence, however circumstantial. The only logical role for a
presumption must be where there is an absence of any useful evidence,
a rare case perhaps only encountered in cases of illegality, and there the
only logical presumption must be that a gift must, actually as apparently,
have been intended.
KELVIN F.K LOW.*
TERMINATION AND THE THIRD TERM: DISCHARGE AND REPUDIATION
IN Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007]
HCA 61; (2007) 82 A.L.J.R. 345, the majority of the High Court of
* Assistant Professor, Faculty of Law, University of Hong Kong.
Advancement; Gifts; Intestacy; Presumptions; Resulting trusts; Singapore
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Australia (Gleeson C.J., Gummow, Heydon and Crennan JJ.) formally

accepted, for the first time, the concept of intermediate terms (of the type
described in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd
[1962] 2 Q.B. 26) for Australian law, while Kirby J. dissented on the
point. A number of points were also made concerning the language of
repudiation and other organising principles of contract law.
Koompahtoo Local Aboriginal Land Council was a land council that
owned land in New South Wales. In July 1997 it entered into a joint
venture agreement for the development of the land with Sanpine Pty Ltd,
which would be manager of the project. The agreement required Sanpine
to keep proper books of account and financial records for the joint venture.
In February 2003 an administrator was appointed to the Land Council and
began making attempts to obtain information as to the financial position
of the venture from Sanpine, who had never kept proper books of account
or financial records. In December 2003, the administrator terminated the
agreement on behalf of Koompahtoo by letter to Sanpine.
At first instance (Sanpine Pty Ltd v Koompahtoo Local Aboriginal
Land Council [2005] NSWSC 3650), Campbell J. held that Sanpine had
grossly departed from the terms of the contract with Koompahtoo and
had totally failed to perform its accounting obligations under the contract.
Having regard to the nature of the agreement and the consequences of
such breaches, it was held that the breaches were sufficiently serious to
give Koompahtoo a right to terminate. Campbell J. denied Sanpine the
declaration it sought that the termination by Koompahtoo was invalid.
By majority, the New South Wales Court of Appeal allowed an appeal
by Sanpine: Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council
[2006] NSWCA 291. Giles J.A. said that Campbell J. could have decided
the case on the basis of termination for sufficiently serious breaches
of intermediate terms or termination because Sanpine had shown a
repudiatory intention, and should have chosen the latter. This was
because this was seen as a case of Sanpines alleged unwillingness,
not inability, to perform the contract. He decided that although Sanpine
had breached the joint venture contract, the breaches did not justify
termination. Bryson J.A.s dissent, in apparent conformity with Campbell
J.s decision, focused on the importance of Sanpines reporting obligations
to Koompahtoos entitlements under the agreement.
The High Court unanimously allowed the appeal. The majority emphasised the difference between renunciation of a contract, where a party
evinces an inability or unwillingness to render substantial performance of
a contract, and repudiation in the form of a breach justifying termination. Kirby J., in a separate judgment, agreed with the majority in most
respects, apart from the tripartite categorisation of contractual terms and
recognition of the intermediate term, discussed below.
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The meaning of the word repudiation was considered. Two meanings

were identified: (1) conduct evidencing an unwillingness to render
substantial performance of the contract (this, it was said, could be termed
renunciation); and (2) breach of contract which justifies termination (at
[44]). The overlap between renunciation and failure of performance was
recognised as conceptually untidy, and there was a mild warning against
the use of the term repudiation to refer to the conduct of the party relying
upon anothers default. This is a little surprising for a court previously
unattracted to taxonomies.
The majority then accepted what is often said to be the taxonomy from
Hongkong Fir, recognising flexibility, limitations on the right to rescind,
and just outcomes where an inessential term was breached, as desirable
consequences of such a taxonomy (at [51][53]). There is a difficulty in
ascribing the terminology of intermediate term to Hongkong Fir. The title
intermediate term was chosen by the majority (at [51][52]), although
it is a phrase that none of the judgments in Hongkong Fir ever used,
was first employed in the catchwords of the headnote for the Queens
Bench report of Hongkong Fir and can probably be attributed to the
commentators who brought it into vogue at that time (see, for a discussion
of this, Carter, Tolhurst and Peden, Developing the Intermediate term
Concept (2006) 22 J.C.L. 268 at 271 naming Furmston, (1962) 25 M.L.R.
584 as the originator of the phrase.) Without descending into excessive
detail, however, the majority adopted the hybrid model, combining the
condition-warranty distinction as a starting point, with the flexibility of
Hongkong Fir. And to decide if a breach of a non-essential term went to
the root of the contract, it is possible to examine the seriousness of the
breach and the adequacy of damages as a remedy (after considering the
benefit to which the injured party is entitled under the contract).
While the majority distinguished between the combined intention of the
parties at the time of contracting and the intention exhibited by one of
the parties at the time of breach (at [56]), for the purpose of assessing
the seriousness of the breach, there was a curious absence of reference
to principles of interpretation. Reference was made to it being . . . a
question of construction of the contract to be decided in the light of its
commercial purpose and the business relationship it established (at [68]),
with nothing more before a close analysis of the facts of the instant case.
The use of Jordan C.J.s exposition in Tramways Advertising Pty Ltd v
Luna Park (NSW) Ltd (1938) 38 S.R. (N.S.W.) 632 at 641642 to delineate
essentiality of terms disguises what Kirby J. made plain: the ascertainment
of common intention, by use of subjective considerations, in an effort to
isolate essential conditions ignores the objective significance of breach in
the circumstances (see [101]).
Campbell J.s judgment was read by the majority as resting on the
seriousness of the breaches rather than on questions of intention or
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renunciation. This is not how the majority in the Court of Appeal read
the judgment. The majority in the High Court went to great lengths to
explain the differences in interpretation of the judgment at first instance.
The extent that appellate judges could take a different view as to what
was decided reflects adversely on both the terminology employed in this
area of the law and the lack of clarity as to the applicable tests.
The majority thought that Campbell J., on the basis that he was not
dealing with renunciation, was correct in his ultimate result. The courts
analysis as to the breaches and their consequences at [68][69] reveals that
the majority, in construing the contract to discover the parties intentions
as to the consequences of non-compliance with a term, ended up finding
that the obligation to keep the books and accounts in proper order was
essential. The word essential was used, despite the possibility of
confusing it with an essential term or condition. Perhaps it would have
been better to say essential in the circumstances, linking the term to
the circumstances as the Hongkong Fir approach requires. The court held
that the breaches were numerous, gross, and deprived Koompahtoo of a
substantial part of the benefit of the contract so as to justify termination
for breach of the intermediate term relating to keeping proper books of
account. This test of a substantial part of the benefit of the contract is
different to Diplock L.J.s deprived of substantially the whole benefit
(Hongkong Fir at 6970, emphasis added).
Kirby J. however saw this as a case to make some important
doctrinal changes to the categories of terms in the law of contract. His
Honour emphasised the importance of rationalising groups of cases and
taxonomies in the law of obligations. As a single sentence, His Honour
commented Doctrine matters (at [78]). His model saw the existence
only of conditions and warranties (for clarity), with a rule that unless
otherwise agreed, a breach that substantially deprives the other party of
the benefit of a contract should entitle that party to terminate it, no matter
whether the term in question is essential, intermediate, or inessential
(at [113]). Kirby J. disposed of the case by holding that the objective
significance of the breach in all the circumstances was such as to validate
termination.
But it is Kirby J.s rejection of the intermediate term that is most
striking. His Honour makes an important point forcibly (at [107]):
Respectfully, I disagree with this [the majority] approach. If the
classification of a contractual term as intermediate is nothing more
than a function of ex post facto evaluation of the seriousness of
the breach in all of the circumstances, then the label itself is
meaningless. It is not assigned on the basis of characteristics internal
to, or inherent in, a particular term, as the joint reasons themselves
acknowledge. Rather, it is imposed retrospectively, in consequence
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of the application of the judicial process. Effectively, there is no

basis, and certainly no clear or predictable basis, for separating
intermediate terms from the general corpus of non-essential terms
of warranties prior to adjudication in a court. This throws into sharp
relief the extreme vagueness of the Hong Kong Fir parties and those
advising them. It has the potential to encourage a proliferation of
detailed but disputable evidence in trial courts and consideration
of such evidence in intermediate courts. It renders uncertain the
distinctions between the several categories said to provide a legal
justification for the very significant step of terminating an otherwise
valid contract.
The majoritys acceptance of intermediate terms necessarily involves a
court considering more of the surrounding circumstances of a transaction.
A court will do this to determine the parties intentions for assessing
the seriousness of the breaches. But this exercise sits uneasily with the
exclusion of parol evidence and the notion of the primacy of the written
contract. Especially in commercial cases, the parties have written contracts
operating to the exclusion of everything else which the parties did not
record. Expanding the scope of what is relevant to the interpretation
question makes it difficult for a lawyer simply to advise on the contract
itself with a little background from the client (mentioned in Berg (2006)
122 L.Q.R. 354 at 356).
It is submitted respectfully that Kirby J.s view is preferable. It is in
conformity with the suggestion by Ormrod L.J. in Cehave NV v Bremer
Handelsgesellschaft mbH (The Hansa Nord) [1976] Q.B. 44 at 84 that
rather than worrying about a third category of stipulation, focus should
fix on whether there has been the de facto destruction of the consideration
for a promise to reveal if there can be discharge. This was noted as
a preferable view more than 30 years ago (Reynolds (1976) 92 L.Q.R.
17 at 20). The issue has, therefore, been a live one for some time and
Koompahtoo does not necessarily answer all the difficulties.
The test stated in leading text books for the right to terminate (see,
e.g. Peel, Treitels The Law of Contract, 12th edn (2007), at para.18.23;
Carter, Peden and Tolhurst, Contract Law in Australia, 5th edn (2007), at
p.687; Seddon and Ellinghaus, Cheshire and Fifoots Law of Contract, 9th
Australian edn (2008), at paras 21.11 and 21.12; Fridman, Law of Contract
in Canada, 4th edn (1999), at pp.516532) is to focus on whether the
breach was sufficiently serious. The prospect of such breaches giving rise
to intentions not to be bound is mentioned, and the admittedly subtle
(in the words of Carter et al. at p.695) distinction is problematic but the
merger of the concepts of absence of willingness to perform, and serious
failures to perform, does not appear to have diminished the enthusiasm
for the application of both tests in the cases.
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The use of a third category creates many difficulties of application. The

point is well made that a breach that substantially deprives another party
of the benefit of a contract should entitle that party to terminate it, no
matter whether the term is essential, intermediate, or inessential. To try to
ascertain the effect of a breach by reference to the categorisation of the
term which has been breached may lead to circularity of reasoning (see
Cheshire and Fifoot at p.1032). The task of identifying a third category
of term, with its own sophisticated terminology, can only exacerbate
the potential for circularity. A lawyer called to advise a client whether
to terminate faces a difficult problem, especially if terminology and
concepts overlap, with any error proving expensive. Sir Jack Beatson
has commented that in many cases an innocent party . . . may have to
wait and see whether the consequences of the breach turn out to have so
serious an effect (Ansons Law of Contract, 28th edn (2002), at p.141),
although Peel and Sir Guenter Treitel both appear to accept the need for
intermediate terms (see Peel at para.18.048 and Treitel, 11th edn (2003)
at p.797) on the basis of practicality.
Despite the definition of repudiation and the suggested use of the word
renunciation offered by the majority, there was no detailed discussion
of how intermediate terms interact with concepts of, and tests for,
renunciation. The majority said a serious breach of an intermediate term
can justify termination (at [71]). There is room for overlap. Professor
Carter has observed that termination for breach of an intermediate term
and termination for repudiation may overlap, but they are conceptually
different as the focus of the repudiation doctrine is on the intention and
acts of the promisor, whereas under the Hongkong Fir doctrine the focus
is on the consequences of the breach (Breach of Contract (1991), at
para.643). Guidance as to what amounts to repudiation in the sense of
renunciation may well be found in authorities dealing with anticipatory
breach (and issues of construction in the context of anti-technicality
clauses) such as The Afovos [1983] 1 W.L.R. 195 at 203 per Lord Diplock,
whose focus was on
whether the threatened non-performance would have the effect of
depriving that other party of substantially the whole benefit which
it was the intention of the parties that he should obtain from the
primary obligations of the parties under the contract then remaining
unperformed.
There are practical difficulties for such refined and sometimes inconsistently used terminology, and the application of the test as to conduct
validating termination remains difficult. The first applications of the principles in Koompahtoo are in the sale of land case Vella v Ayshan [2008]
NSWSC 84 and the partnership dispute in Corporate Systems Publishing Pty Ltd v Lingard (No.4) [2008] WASC 21. They demonstrate some
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reductionism in application. However, it may be said that both Vella and

Corporate Systems were easy cases. The issue in Vella was the last one
dealt with in the judgment, seemingly as a matter of completeness to
dismiss a weak and less relevant argument. Indeed, a few missing trees
and some minor defects in a property the subject of the transaction in
Vella could not amount to so serious a breach of a non-essential term
as to mandate termination. The same could almost be said of Corporate
Systems. However, in Corporate Systems it was the lateness of delivery
of fee collections to a partner after the partners had signed an agreement
attempting to settle a dispute about alleged fraudulent breaches of trust
pending the sale of the accounting practice that fell . . . well short of
being of a sufficiently serious character . . . (at [316]). This is a little
problematic. That the plaintiff never complained about his fee collections
entitlements and his partners had always intended to give him his money,
are matters that would be considered by the majority as admissible. But
if one focuses only on the contract objectively, as Kirby J. would urge,
then breaching an obligation to make payment of fees under this type of
contract, within a month of the agreement, could be viewed as serious.
Other applications of the principles in Koompahtoo may prove instructive.
While they have now been formally accepted as law in Australia, there
are still jurists and commentators who do not believe intermediate terms
should be recognised in a hybrid structure of three types of terms. That
point of divergence between the majority and Kirby J., and particularly
how common intention is to be determined, is likely to surface again in
the future.
KANAGA DHARMANANDA.*
ANTHONY PAPAMATHEOS.**
CLEARING HOUSES AND INSOLVENCY IN AUSTRALIA
SUPPOSE that A and B supply services or goods to each other at intervals.
If these are provided on credit, a sensible and economical approach to the
settlement of their mutual indebtedness is to treat their relationship as one
of running account and periodically to have the balance paid, whether
in favour of A or of B. A and B might be engaged in a network of
supply with others. Looking first at the bilateral relationship of A and
B, A may be a creditor of B at the end of the agreed period. In relation
to all members of the network (including B), however, A may be a net
creditor for a different amount or even a net debtor. In that case, the
aggregate bilateral running account relationships can be consolidated with
* Barrister, Western Australia.
** Solicitor, Western Australia.
Australia; Contract terms; Development; Joint ventures; Repudiation; Termination
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[Vol. 124
the aid of a clearing house. Instead of a series of bilateral net settlements,

all members of the network can be taken together in a multilateral net
settlement, with consequent savings in the cost of settlement. In this way,
all net debtors will pay the sum of their indebtedness to a clearing house,
which in turn will pay the sums received over to net creditors according
to their individual entitlements. The gross amounts paid in and out will
of course be identical, even though payments in by individual net debtors
will not match payments out to individual net creditors.
Thus stated, the clearing house serves only as a device to facilitate
and abbreviate the flow of cross-remittances needed to discharge all the
relevant debts. It is not the provider of goods or services, nor does it
at any point incur any obligation for the provision of those goods and
services. In the event of the insolvency of one of its members, the simple
settlement system outlined above will be disrupted in two respects. First,
amounts owed to the insolvent over the relevant period will be embraced
by a notional trust for the benefit of all creditors of the insolvent (Ayerst
v C & K Construction Ltd [1976] A.C. 167), and not just those who
are members of the network, and may not otherwise be divested by the
insolvent (Re Jeavons Ex p. Mackay (187273) L.R. 8 Ch. App. 643).
Amounts owed by the insolvent will be the subject of a proof lodged in
its insolvency by those members of the network who have provided goods
or services to the insolvent. Secondly, a decision will have to be taken
about recalculating the amounts owed to solvent members inter se under
the clearing house arrangement. Should these amounts remain unchanged,
as though the insolvent were still an active member of the clearing house,
or should the insolvent member be removed from the clearing house
arrangement over the relevant period, so that net credits and debits of the
remaining members have to be recalculated? The only feasible approach is
the latter, for otherwise the clearing house itself would inherit the shortfall
representing the difference between claims made against the insolvent
and dividends received in respect of those claims. The clearing house is
designed to be a conduit and not a reservoir of debt or credit.
In securities and money markets, where the amounts at stake are
colossal, the taking of margin deposits, marked to market at intervals,
provides partial protection against the domino effect of successive
insolvencies that might otherwise be caused if one of the market entities
becomes insolvent. To be fully effective, however, this measure must
be supplemented by other means permitting the multipartite clearance of
debts, unimpeded by the process of insolvent liquidation of the affected
market entity. Multipartite clearance in this way might be accomplished by
a statutory exemption from the normal processes of insolvent liquidation
(e.g. Part VII of the Companies Act 1989). Alternatively, a contractual
structure might be devised that strikes at the roots of indebtedness and
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brings in the clearing house itself as a contractual counterparty by novation

or by other means.
The contractual solution to the insolvency problem was the subject
of the Australian High Courts decision in International Air Transport
Association v Ansett Australia Holdings Ltd [2008] HCA 3, reversing
(2006) 53 A.S.C.R. 501. No Australian legislative exemption from the
normal insolvency processes applied to the clearing arrangements in the
present case. The contract between the various members of the appellant
organisation, IATA, and IATA itself, was contained in an agreement (the
Multilateral Interline Traffic Agreement) that incorporated IATA Clearing
House Regulations. It was the same contract that had been struck down
by the House of Lords in British Eagle International Air Lines Ltd v
Compagnie Nationale Air France [1975] 1 W.L.R. 758, apart from an
amendment in reg.9(a), introduced after British Eagle, which stated that
no liability for payment and no right of action to recover payment
shall accrue between members of the Clearing House. In lieu thereof
members shall have liabilities to the Clearing House for balances
due by them resulting from a clearance or rights of action against
the Clearing House for balances in their favour resulting from a
clearance and collected by the Clearing House from debtor members
in such clearance.
It was common ground between the parties that this amendment was
introduced to overcome the effect of the decision in British Eagle. The
former version of the Regulations had provided for debits and credits
arising in respect of clearance transactions to be referred to clearing
((2006) 53 A.S.C.R. 501 at [57] (Maxwell P.)).
IATA clearance comprised mainly the on-carriage costs of an airline
carrying other airlines passengers and their luggage. In British Eagle,
Air Frances defence to a claim brought by the insolvent British Eagle
was that, as a result of the clearing house agreement, it owed nothing
to British Eagle for the carriage of its passengers and their luggage
by the latter. The claim in the Ansett case, however, was not brought
by one airline against another but by the IATA clearing house itself
against a net debtor airline, Ansett, which had been made the subject
of a deed of company arrangement, executed after Ansett had been put
into administration (Corporations Act 2001 ss.439A and 444A). Ansett
therefore posed in an even more direct way than British Eagle the question
whether the clearing house agreement was compatible with insolvency
law. It was contended by Ansett that the clearing house agreement for the
settlement of claims was (a) repugnant to statutory provisions allowing
only the administrator to deal with a companys property (Corporations
Act 2001 s.437D) and providing for a set-off of mutual credits and mutual
debts (Corporations Act 2001 s.553C); and (b) more generally, contrary
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to public policy inherent in insolvency legislation. Reversing the majority

decision of the Victoria Court of Appeal, the High Court by a majority
(Kirby J. dissenting) ruled that the change in reg.9(a) was sufficient to
preserve the clearing house agreement from being struck down on either
of the above grounds.
The repugnancy argument turned upon an analysis of the indebtedness
that arose whenever goods or services were supplied by Ansett. Was a debt
for these services at any time owed by one airline to another, or was there
from the outset only the obligation of a net debtor airline to pay the sum
of its indebtedness to the clearing house, and the right of a net creditor
airline to receive from the clearing house the sum of its entitlement?
This question was treated throughout these proceedings as dependent
on the construction of the clearing house agreement. In the Victoria
Court of Appeal, the majority held that the agreement gave rise to debts
between the airline issuing tickets and the airline carrying passengers,
and these debts remained in existence until cleared. Regulation 9(a) could
not be read in isolation from other provisions of the agreement and
Regulations. Numerous indicators pointed to a continuing indebtedness
between member airlines. These included provisions: excluding garnished
debts from the clearance process, which recognised that there were debts
between individual airlines that could be garnished; treating clearance
(as opposed to notification of claims for clearance) as constituting a
satisfaction and discharge of all claims dealt with in clearance; and
deeming all debts in clearing to be mutual debts of the parties involved.
The arguments of the majority in the Victoria Court of Appeal were
accepted by the lone dissentient in the High Court, Kirby J., who went
on to add that under the Regulations there was no novation to IATA
of the debts originally incurred between airlines. IATA never at any
time became a central counterparty but acted only as a clearing agent
([2008] AHC 3 at [137]). Furthermore, according to Kirby J., there were
various contingencies, whose occurrence could not be known at the time
of the on-carriage arrangements, which if eventuating would require direct
enforcement by the carrying airline against the ticket issuing airline (at
[142]).
On the construction of the agreement, the arguments of the majority in
the High Court lack the power of Kirby J. and the majority of the Victoria
Court of Appeal. With respect to Gleeson C.J., Ansetts claim is not
satisfactorily disposed of by a finding that reg.9(a) was IATAs response
to the British Eagle decision and a simple statement that the regulation
was not incompatible with the rest of the agreement (at [22]). The other
majority judgment (Gummow, Hayne, Heydon, Crennan and Kelfel JJ.)
throws little more light on the reasons why reg.9(a) was compatible with
the rest of the agreement. This judgment also lays heavy emphasis on
reg.9(a) itself, so that the only debt or credit which arises is that between
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IATA and the member airline in relation to a final, single balance of all
items for the relevant clearance (at [60]). There may have been rights
and obligations arising between airlines, but they were not associated with
a debtor-creditor relationship, and there was certainly no question of any
debt between airlines being annihilated (the language of the majority
in the court below) and replaced by a debt between an airline and the
IATA clearing house (at [62]). Given the complexity of the agreement and
the Regulations, however, it is inherently unlikely that their fundamental
character could be altered solely by means of the amendment made to
reg.9(a).
There remained the issue of public policy, which fell away in the
Victoria Court of Appeal once the majority reached its decision in favour
of Ansett on the construction of the agreement. Three points may be
made here. First, it was not a contentious matter in this case that the
rules on pari passu distribution and the orderly disposition of insolvents
estates applied just as much to a deed of company arrangement executed
after a company went into administration as they did to other forms of
insolvency distribution. The deed of company arrangement was binding
on all creditors (Corporations Act 2001 s.444D). Ansetts objection to the
agreement was that it allowed individual airlines to benefit from payments
made by Ansett when they were not making a claim under the deed of
company arrangement and when, if they had not received services from
Ansett, they could not have used set-off to recover the value of services
given to Ansett (at [92]).
Secondly, Kirby J. implies that if debts that, in his opinion, were
owed by one airline to another had been transferred (the word he uses
is novated) subsequently to the IATA clearing house, instead of merely
being dealt with by the clearing house as a clearing agent, this would not
have been repugnant to insolvency legislation (at [137]). Nevertheless, he
then goes on to recite an argument that might be used to strike down
such transfers, namely, the absence of mutuality between the relevant
debtor airline and the IATA clearing house (at [138]). As stated, this is
an application of the principle in Re Jeavons Ex p. Mackay that assets
may not be divested on insolvency so as to shrink the estate available
for insolvency distribution. This principle poses a threat to novation
arrangements but it is important to note its limitations. The position of
IATA, in relation to executed on-carriage arrangements and accrued debts,
is quite different from the position of a clearing house in securities and
financial markets. The latter clearing house is novated to executory future
and forward contractual obligations incurred in market conditions, where
mutuality at all times is present. If there had been a subsequent transfer
to IATA of Ansetts rights against other airlines, it would not be easy to
identify matching benefits transferred by IATA to Ansett.
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Thirdly, the arguments of Ansett on public policy were more broadly

presented in the High Court and indeed appeared to challenge contractual
agreements which purport to circumvent or dislocate the order of
priorities that would arise on insolvency distribution, specifically, in this
case, the distribution provided for in a deed of company arrangement
and given statutory effect by the Corporations Act (at [72]). Ansetts
public policy position, as expressed, is too extravagant to be acceptable.
There already exist statutory provisions dealing with unlawful preferences,
undervalue transactions and fraudulent conveyances that are designed to
shore up an estate so as to preserve value for creditors on an insolvency
distribution. The introduction alongside these provisions of a public policy
principle of uncertain scope would render the limitations of these statutory
provisions otiose. Furthermore, Ansetts public policy principle would
require very little extension to strike at the very roots of secured credit,
given that in equity a promise to grant security is as good as security.
The High Court decision in International Air Transport Association
v Ansett Australia Holdings Ltd gives some comfort for the view that
clearing house arrangements can be rendered proof against insolvency
distribution rules if appropriately drafted. In the end, however, it is all a
matter of contractual construction, and cases on contractual construction
are of limited effect outside their immediate spheres. Legislation rendering
clearing immune from insolvency procedures is likely to be a surer path
than contract, and contract that creates a debt owed in the first instance to
the clearing house, or novation that transfers both rights and duties under
an executory contract, are likely to be more effective than a mere transfer
of indebtedness under an executed contract.
MICHAEL BRIDGE.*
THE INN OF THE OUTER TEMPLE
IN 1973 Professor Simpson announced the discovery of a puzzling
reference to the Outer Temple in a manuscript year-book account of the
serjeants call of 1425.1 In addition to two new serjeants from the Inner
Temple and one from the Middle Temple, one new graduand (William
Halle) is described as being of the Outer or Utter Temple (de exteriori
Templo).2 Simpson posed the question whether this last was merely
a geographical address or the name of a hitherto unknown institution,
and concluded that it was most likely to have indicated an institution. It
was presumably established within the bounds of the Temple but outside
* London School of Economics.
Australia; Insolvency; Multi-party disputes; Recognised clearing houses
1 The full French text is printed in Baker, The Order of Serjeants at Law (1984), at p.260.
2 Simpson, The Outer Temple as a Legal Inn (1973) 89 L.Q.R. 3235. The term Outer Temple
was resurrected in Victorian times and is still in use; but in the 15th- and 16th-century vernacular the
preferred adjective seems to be Utter, as in the case of utter-barristers.
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the city bars, and might perhaps be the same as lostel du Templebar
mentioned in a letter of 1426.3 The present writer, while cautiously
treating the mystery as unresolved, has been inclined until now to favour
the mere-address theory.4 Only two other references had been found to
individuals described as of the Outer Temple: one of them a John Brown
(not certainly identifiable) in 1480, and the other Anthony Wood in 1535.
Now, Wood was a member of the Middle Temple, where he read in 1540,
and so by his time the Outer Temple can only have been an address. It
is evident from the records of the two existing societies in the Temple
that the place was inhabited in the early 16th century by members of both
those societies. In 1510 and 1517, the Inner Temple assigned chambers in
a tower or bastelle in the Outer Temple (in exteriori templo),5 though
no one is very sure what this was or what title the Inner Temple had
in it. In 1517, however, the Inner Temple was also complaining to the
Middle Temple about a latrine in le utter Inne which was a nuisance
to its members there, a complaint which seems to show that the Middle
Temple had control over at least part of the place, or over its members
living there.6 There are no references to the Outer or Utter Temple in
either inns records after 1521.7 By the early 17th century it was not even
wholly clear where it had been.8 But none of this disproves the possibility
that the Outer Temple had once been deemed an inn.
A recent discovery in the Kings Bench plea rolls has placed it
beyond doubt that Professor Simpson was right, as far as the earlier
15th century is concerned.9 In Michaelmas term 1448 an action upon the
statute of maintenance was brought by Thomas Tewe and William Horne
of Daventry, Northamptonshire, gentlemen, against William Catesby
3 Letter from Prior John Paston to les courtesans demorans en lostel du Temple-bar en la cite de
Londres, January 23, 1426, informing them of the excommunication of William Paston, serjeant at law:
Brit. Lib. MS. Add. 27443, fo. 79; printed in N. Davis (ed.), Paston Letters and Papers of the Fifteenth
Century, pt II (1976), p.507, no.868. As Professor Simpson pointed out, courtesans here means men
of court. It is possible, of course, that the reference is to the whole of the Temple.
4 The Inner, Middle and Outer Temple in Baker, An Inner Temple Miscellany (2004), at pp.2431;
reprinted with some alterations from The Common Law Tradition (2000), at pp.2936.
5 Inner Temple Archives, PAR 1/1, fo. 25 (Robertus Pett et Audele assingnantur in cameram ubi
Edwardus Halys jacet in le Bastelle in exteriori templo). There is another reference to the Bastille in
PAR 1/1, fo. 39 (Thomas Newton assignatur in camera cum Hassall in ulteriori templo in le bastelle
salvo jure cujuslibet). There is another assignment to chambers (undescribed) in 1517: PAR 1/1, fo. 38v
(Thomas Denny admittitur cum Johanne Chapnes uno secundario de London. in exteriori templo ubi
Chedley nuper jacuit).
6 PAR 1/1, fo. 42v (Item ordinatum fuit ad istud parliamentum quod M. Wye et ego communicaremus
cum Tresorario medii Templi pro reformacione unius latrini facti in le utter Inne ad nocumentum sociorum
nostrorum ibidem).
7 PAR 1/1, fo. 78v (Sydenam admissus est in camera in exteriori templo ubi Swyllyngton prius jacuit
. . .).
8 Sir George Buc, The Third Universitie, appended to Stow, Annales (1615 edn), col. 971, identified
it as Exeter House, which once belonged to the bishops of Exeter and lay between the Middle Temple,
Exeter Street and the Strand.
9 KB 27/750, m. 105. The discovery was made by Professor Jonathan Rose of Arizona State University,
who very generously furnished the writer with a copy of the roll.
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[Vol. 124
of Ashby St Leger, esquire, Robert Catesby of Newnham, gentleman,

Richard Scoter of Daventry, butcher, Thomas Willoughby of Berughby
[?Barrowby], gentleman, and Thomas Nayleston of Buckby, yeoman, for
supporting an appeal of robbery brought against them and others in the
Kings Bench by Richard Warde. William Catesby pleaded that he was a
fellow of the Inn of the Inner Temple, which was an inn of men of court
and of counsellors of the law (unus sociorum hospicii interioris Templi
London . . . quod quidem hospicium est quoddam hospicium hominum
de curia legis temporalis et hominum consiliariorum legis predicte), and
that he was retained in the appeal as counsel learned in the law. This
is interesting as showing that Sir William Catesby (d. 1479), as he later
became, was of the same society as his better known son of the same
name, who was chancellor of the Exchequer and a bencher of the Inner
Temple in Edward IVs reign. It is also interesting as being the earliest
example so far found of a lawyer explicitly pleading membership of an
inn of court as a professional qualification, using a formula which has
hitherto been known from an undated Lincolns Inn precedent printed by
Rastell.10 A third point of interest is the subsequent pleading, in which
the plaintiffs replied that Catesby had given his own money to support
the appeal, and Catesby rejoined that he had lent it to the appellor in his
poverty; this shows that it was considered professionally appropriate, or
at least legally permissible, for counsel to lend money to their clients to
enable them to litigate.
More interesting still, however, is Thomas Willoughbys plea, which is
identical to Catesbys except that he claimed to be a fellow of the Inn of
the Utter Temple (unus sociorum hospicii exterioris Templi), which he
accorded the same status as an inn of men of court and of counsellors
of the law. We do not know much about this Thomas Willoughby, save
that he was escheator for Northamptonshire and Rutland in 145354. But
we can no longer doubt that what he belonged to was an institution or
society. Moreover, his plea shows that in 1448 some considered even
lesser inns to be inns of men of court, as indeed in a non-technical
sense they were; this is confirmed by a Clements Inn precedent, using
the same formula, supposedly dating from 1479.11 Yet Sir John Fortescue,
who was himself a prominent member of Lincolns Inn in the 1420s and
1430s, and in whose court (as chief justice) the 1448 case was brought,
wrote that there were four inns of court (hospicia curiae), and this number
cannot have included the Utter Temple. It must therefore have been one
of the hospicia minora or inns of chancery.12 By the end of the century
10 W. Rastell, Colleccion of Entrees (1566), fo. 396, pl. 16. This pleading, which may be later, also
alleges that the inns were immemorial; but this allegation is not made in the 1448 case.
11 W. Rastell, A Colleccion of Entrees (1566), fo. 107; 78 Selden Soc. 218. It has not been found in
the roll cited (Mich. 19 Edw. IV, ro. 61).
12 Chrimes (ed.), De Laudibus Legum Angliae, 2nd edn (1949), at p.116.
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it would be unthinkable to call a serjeant from an inn of chancery, since

those lesser inns had become associated with students and attorneys. But
a serjeant is said to have been called from Cliffords Inn in 1396,13 and
although this was unusual enough to be recorded in the hall window there,
it was also a proof that there had once been no very precise professional
distinction between the greater and lesser societies. Fortescue said there
were ten inns of chancery. Since only nine survived in the early Tudor
period, the Outer Temple may well have been the tenth.14 But it cannot
have been a viable independent institution if it lacked a hall, and that is
doubtless the principal reason why it did not survive. By the 16th century
we have reports of moots in the inns of chancery, and tables of mooting
days in each of them, but no mention is ever made of the Outer Temple.
As a separate entity it had ceased to exist.
J.H. BAKER.*
13 William Skrene: Baker, Order of Serjeants (1984), at p.159, fn.7.

14 The only other candidate so far is an even more obscure institution called the Long Entry. Thomas
Swan, as pensionarius hospicii vocati Le Longentre, brought a suit for dues in 1476 (CP 40/859, m.
439). This was probably the messuage in St Georges Lane in the parish of St Sepulchres cum longo
et stricto ingressu left by John de Tamworth (a Chancery clerk who died in 1374) and which is thought
to have been part of an inn of chancery called St Georges Inn: Williams, Early Holborn (1927), i. 146,
149, 157. This house was occupied by Bryan C.J., who also owned Thavies Inn. Since Swan was himself
sued for dues by Thavies Inn in 1477, it is possible that the Long Entry was an outpost of Thavies Inn.
* St Catharines College, Cambridge.
Court of Kings Bench; Inns of Court; Legal history
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INTERNATIONAL LAW IN DOMESTIC COURTS:

THE DEVELOPING FRAMEWORK
INTRODUCTION
TO an extent almost unimaginable even 30 years ago, national courts
are called upon to consider and resolve issues turning on the correct
understanding and application of international law.1 Increasing reference
to international law in the English courts has put pressure on established
doctrines of English constitutional law. In this article, we attempt an
evaluation of the current position, and suggest ways in which the influence
of international law upon domestic law should be mediated by our
constitutional law.
In a dualist state such as the United Kingdom, international law and
domestic law are regarded as separate legal systems, operating on different
planes.2 International law does not, as such, form part of the domestic legal
system. While in particular instances rules of international law may apply
in domestic law, they do so by virtue of their adoption by the internal law
of the state.
On the traditional view, international law was concerned almost entirely
with the relations and activities of states. This situation began to change
particularly in the years following the First World War, when the Covenant
of the League of Nations was drawn up, together with Minorities Treaties.
In the years since the end of the Second World War, international law has
been transformed. Significant changes in the form, content and sources of
international law have occurred, as well as the appearance of new areas of
international law. The idea of universal human rights gathered momentum
and legal obligations owed by states to individuals were created.3
States may confer upon individuals the right of direct access to
international tribunals. The right of individual petition to the European
Court of Human Rights in relation to the European Convention on Human
Rights (ECHR) was accepted by the United Kingdom from January 14,
1966. Similar mechanisms of complaint in other treaties are not obligatory
(for example, the Optional Protocol to the International Covenant on Civil
and Political RightsICCPR), and have not been accepted by the United
Kingdom.
1 Compare, e.g. Brierly, International Law in England (1935) 51 L.Q.R. 24, with Lord Bingham of
Cornhill in the foreword to Fatima, Using International Law in Domestic Courts (2005).
2 Jennings and Watts, Oppenheims International Law, Volume 1: Peace, 9th edn (1992), at pp.5455.
3 Jennings, An International Lawyer Takes Stock (1990) 39 I.C.L.Q. 513; Brownlie, Principles of
Public International Law, 6th edn (2003), at p.536.
388
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International Law in Domestic Courts
389
Important areas of international law have appeared or been substantially

developed in recent decades through treaties relating to, for example, the
protection of the environment, international criminal law, exploitation of
resources and raw materials, energy, trade, etc. International law in the
form of binding customary rules (customary international lawCIL) has
also expanded and come to be perceived as a dynamic human artefact
which changes and may be consciously developed over time.4
THE CONSTITUTIONAL CONTEXT
Since the effect of international law in domestic law depends on domestic
constitutional arrangements, it is necessary to recall certain fundamental
constitutional principles. The primary principle is that of the sovereignty
of Parliament in the making of laws.5
This principle has a long history and a powerful modern underlying
rationale, in the form of the primacy to be accorded democratic decisionmaking in laying down the general law.6 Democratic decision-making
presupposes a political community constituting a constituency to be
governed by defined representative institutions, typically provided by
the nation state.7 The principle of parliamentary sovereignty has been
subjected to criticism in certain respects. We do not propose to address
these debates in this article, since as Lord Steyn has said, even if
one subscribes to the view that parliamentary sovereignty may be
qualified: Nevertheless, the supremacy of Parliament is still the general
principle of our constitution.8 Moreover, whatever may be the limits
(if any) to parliamentary sovereignty and the democratic principle, there
is little doubt that in the modern world, at least in the West, the
democratic principle is in general terms the primary source of legitimacy
for authoritative decision-making, particularly in making laws.9 It is a
principle which is itself well recognised in modern case law.10 Therefore,
it seems inevitable that an analysis of the extent to which international
law is incorporated into English domestic law will have to grapple with
how to deal with norms which are binding in international law (generated
4 See, e.g. Dunworth, The Rising Tide of Customary International Law: Will New Zealand Sink or
Swim? (2004) 15 Public Law Review 36; Byers, Custom, Power and the Power of Rules: International
Relations and Customary International Law (1999).
5 The Bedrock of the British Constitution: R. (on the application of Jackson) v Attorney-General
[2005] UKHL 56; [2006] 1 A.C. 262 at [9] (Lord Bingham).
6 Goldsworthy, The Sovereignty of Parliament: History and Philosophy (1999).
7 Canovan, Nationhood and Political Theory (2002); Miller, Citizenship and National Identity (2000);
Scruton, A Political Philosophy (2006), Ch.1; Hobsbawm, Globalisation, Democracy and Terrorism
(2007), at pp.9798. For discussion of the difficulties of transposing the related practices of democracy
and citizenship from the nation state to transnational organisations, see Miller, esp. Ch.5; Hobsbawm,
p.118.
8 Jackson [2005] UKHL 56 at [102], emphasis in original.
9 See, e.g. Dunn, Setting the People Free: the Story of Democracy (2006).
10 See, e.g. Hatton v United Kingdom (2003) 37 E.H.R.R. 28, GC, at [97].
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by modes of production external to the democratic procedures which

operate within the constitution) but which have not been endorsed under
the principal mode of production of binding norms in domestic law (by
enactment by Parliament), and which may not be consistent with or
reflected in ordinary domestic law.
The second principle is that of the separation of powers, between the
legislature, the executive and the courts. The legislature makes new laws
and the executive governs within the framework created by those laws.
It is established that the Crown (the executive) cannot change the law
by the exercise of its prerogative powers. Even before the Civil War,
this principle was judicially recognised in the Case on Proclamations 11 :
. . . the King by his proclamation or other ways cannot change any part
of the common law, or statute law, or the customs of the realm. The
proposition is further underwritten by more than 300 years of history,
including the Civil War itself. Another aspect of the separation of powers
doctrine is the way in which it distributes legitimacy of decision-making
as between the judiciary, the executive and the legislature. The courts
recognise the limits of their judicial expertise and that there are aspects
of executive behaviour that they are ill equipped to decide for themselves
(the deployment of the armed forces and the conduct of foreign affairs are
paradigm examples). Where decisions require legitimacy as the product
of the democratic process, the courts will accord respect to the judgments
of the legislature and executive. The courts also recognise that while they
may develop the common law as cases present themselves, in accordance
with its underlying values and principles, they are ill suited to determine
questions of social policy or administrative feasibility. These principles are
deeply rooted in the modern polity in notions of democratic legitimacy,
that it is for those representing the people in Parliament, and not the
executive or the unelected judiciary, to make the law.
Care should be taken, when articulating the rules which govern the
acceptance of norms of international law into domestic law, not to
undermine these fundamental domestic constitutional principles. Within
our legal and political system, potential dissonance between domestic
law and international law is the price which is paid for the benefits of
self-governance via a democratic system within the nation state. Whilst
there may sometimes be a desire to see rules of international law which
are thought, perhaps, to be more progressive than ordinary domestic law
incorporated by judicial adoption into domestic law,12 this is a path
which would in our submission undermine these domestic constitutional
principles to an unacceptable degree.
11 (1611) 12 Co. Rep. 74 at 75.

12 See, e.g. Re McKerr [2004] UKHL 12; [2004] 1 W.L.R. 807 at [48][50] (Lord Steyn).
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There are two particular risks which should be mentioned, which flow
from the very different political processes involved in, on the one hand,
seeking to negotiate compromises which take account of the competing
interests of a range of states at the international level and, on the other,
seeking to work out solutions to problems through the domestic political
process, taking detailed account of the competing interests internal to a
state to produce a result which is politically acceptable within that state.
First, the negotiation of a treaty or the development of a practice which
may come to contribute to the development of a rule of CIL, where it
takes place without the detailed internal political debate and compromise
appropriate for hammering out detailed rules of law for application in
the domestic legal order, leads to the risk of political gestures, (often
deliberate) ambiguity13 and insufficiently focused and detailed treaty
provisions or practices on the plane of international relations being
translated too readily into binding domestic legal rules.14 This is a risk
which is magnified by changes which have occurred since the 19th century
in the form of legal scholarship in the field of international law. The
indeterminate and highly contestable nature of many treaty provisions
and practices of states leaves it open to legal commentators to seek to
press for particular interpretations of such provisions or acceptance of
such practices as founding rules of CIL (or supporting interpretations of
treaty provisions15 ) which they regard as desirable, blurring the boundary
between interpretation and political advocacy. This has been contrasted
with the more rigorous, positivist, scientific approach to identification
of rules of international law in the sort of cataloguing treatises on the
subject produced in earlier times.16 Domestic courts are largely dependent
on commentaries to identify rules of international law and to assist in their
interpretation (it is rare that any evidence in the usual form is adduced in
proceedings).
13 cf. R. v Secretary of State for the Home Department Ex p. Adan [2001] 2 A.C. 477 at 495496.
14 This is the other side of the coin from the obiter comment by Cooke P. in Tavita v Minister of
Immigration [1994] 2 N.Z.L.R. 257 at 266, about the unattractiveness of an argument that a treaty
had no effect in the domestic legal system. For illustration of the problems which can arise through
the dissonance between the international political process and the domestic, constitution-bound political
process, see Charlesworth, Chiam, Hovell and Williams, Deep Anxieties: Australia and the International
Legal Order (2003) 25 Sydney Law Review 423, esp. 435436. Australian and New Zealand jurisprudence
in this area has proved more receptive to international law than that in England and the US, but at the cost
of apparently growing unease at the constitutional implications: see, e.g. Charlesworth et al.; Dunworth,
The Rising Tide of Customary International Law (2004) 15 Public Law Review 36; Dunworth, Hidden
Anxieties: Customary International Law in New Zealand (2004) 2 New Zealand Journal of Public &
International Law 67.
15 State practice is admissible as an aid to the interpretation of treaty provisions: see Art.31(3)(b) of
the Vienna Convention on the Law of Treaties (1969).
16 Flores v Southern Peru Copper Corp 343 F.3d 140 (2d Cir, 2003), at fn.26, noting that contemporary
international law scholarship is characterised by normative rather than positive argument, and by idealism
and advocacy. Compare also West Rand Central Gold Mining Corp v The King [1905] 2 K.B. 391 at
402 and 407 per Alverstone C.J.
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Secondly, there is a risk of domestic law being determined directly and

without any sufficient mediating process at the domestic constitutional
level by the play of power relations between states at the international
level. It is those power relations which ultimately condition the state of
international law at any given point in time. Despite some shift in focus
since the Second World War as referred to above, international law remains
primarily a system of law for the regulation of relations between states,
and reflects the values which states choose to adopt in the course of those
relations.17 Any given international development may be regarded as good
or bad, depending on ones political point of view; the point, however, is
that it is a development which to some degree may be outside the domestic
political controls which usually govern the adoption of new laws.
In the context of the United Kingdom, it should be noted that with
the development of the domestic constitution through the devolution
settlements in relation to Scotland, Wales and Northern Ireland and the
distribution of law-making powers to their respective legislative bodies,
the argument from the principle of separation of powers for maintaining
a significant distinction between domestic law and international law has
become stronger. The United Kingdom has moved towards increasingly
federal constitutional arrangements. The devolved institutions have still
less control over the assumption of obligations in international law
than does the Westminster Parliament, yet within their designated areas
of competence it is they which have democratic legitimacy and full
legislative power. That power should not lightly be treated as limited
or influenced by actions of the executive government in London, in
relation to the international obligations of the United Kingdom; nor does
it appear attractive to develop fragmented rules of interpretation which
differ depending upon whether one is looking at the legislation of the
Westminster Parliament or the legislation of the other legislatures.
Also, given the sensitivity of the question of reception of international
law into domestic law to the particular constitutional arrangements
and understandings within each state, and the development of those
arrangements and understandings over time, it can no longer be assumed
that countries in the Commonwealth will necessarily adopt the same
solutions.18 Indeed, it is becoming apparent that they do not, and that
the law of (say) England, Australia and New Zealand in this area has
17 See, e.g. Byers, Custom, Power and the Power of Rules (1999); Knop, Here and There: International
Law in Domestic Courts (1999-2000) 32 New York University Journal of International Law & Politics
501 at 503504; Hobsbawm, Globalisation, Democracy and Terrorism (2007), at p.8 (The default
position of any state is to pursue its interests).
18 cf. Tushnet, The Possibilities of Comparative Constitutional Law (1999) 108 Yale Law Journal
1225; Saunders, The Use and Misuse of Comparative Constitutional Law (2006) 13 Indiana Journal
of Global Legal Studies 37; Re Minister for Immigration and Multicultural Affairs Ex p. Lam (2003)
214 C.L.R. 1 at [65][77] per McHugh and Gummow JJ.; and discussion of the different constitutional
contexts in the UK and New Zealand in Hansen v The Queen [2007] NZSC 7.
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developed in recent years in different ways. The point may be illustrated

by reference to the seminal case in New Zealand of Tavita v Minister of
Immigration,19 in which Cooke P. emphasised that the relevant law in
New Zealand was in a state of evolution and relied on the fact that New
Zealand had acceded to the Optional Protocol to the ICCPR, providing
for individual petition to the UN Human Rights Committee, to suggest
that statutory administrative discretions in New Zealand law should be
exercised in accordance with international human rights norms. That has
led to a much increased readiness on the part of the courts in New Zealand
to accept direct impact of international law upon domestic law in other
ways too, such as by reference to an especially strong presumption that
New Zealand statutes should be interpreted compatibly with international
law: Sellers v Maritime Safety Inspector.20 But English law has developed
very differently. The United Kingdom has not acceded to the Optional
Protocol, but the relevant analogue is the United Kingdoms acceptance
in 1966 of the right of individual access to the European Court of
Human Rights (ECtHR) under the ECHR. That did not lead to the
transformation of the relationship of English law to international law
which has occurred in New Zealand. On the contrary, prior to the Human
Rights Act 1998, English law had arrived at a settled understanding
that the ECHR did not apply directly in domestic law to govern the
exercise of administrative discretion or to provide the strong form of
interpretative obligation in respect of statutes which New Zealand law
has come to accept.21 Tavita has not been followed in England.22 In
English law, it was necessary for legislation to be passed, in the form of
the Human Rights Act 1998, to make compliance with Convention rights
mandatory for administrators (s.6(1)) and to create a similar strong rule of
compatible statutory interpretation (s.3(1)).23 The implication is that in the
United Kingdom the constitutional understanding is that, without statutory
19 [1994] 2 N.Z.L.R. 257; see Geiringer, Tavita and All That: Confronting the Confusion Surrounding
Unincorporated Treaties and Administrative Law (2004) 21 New Zealand Universities Law Review 66.
20 [1999] 2 N.Z.L.R. 44, CA. See Gobbi, Making Sense of Ambiguity: Some Reflections on the Use of
Treaties to Interpret Legislation in New Zealand (2002) 23 Stat. L.R. 47. Cf. Hansen v The Queen [2007]
NZSC 7, in which the New Zealand Supreme Court held that the interpretative obligation contained in s.6
of the New Zealand Bill of Rights Act 1990 is not as strong as that contained in s.3(1) of the UK Human
Rights Act: see [57][62] (Blanchard J.), [149][158] (Tipping J.), [235][254] (McGrath J.). This may
suggest by analogy that the interpretative obligation in Sellers, although strong, is not as strong as that
under s.3(1) of the Human Rights Act.
21 See in particular R. v Secretary of State for the Home Department Ex p. Brind [1991] 1 A.C. 696; R. v
Secretary of State for the Environment Ex p. NALGO (1992) 5 Admin. L.R. 785; R. v Ministry of Defence
Ex p. Smith [1996] Q.B. 517; R. v Secretary of State for the Home Department Ex p. Launder [1997] 1
W.L.R. 839, HL; R. (on the application of Hurst) v London Northern District Coroner [2007] UKHL 13;
[2007] 2 A.C. 189; and see Geiringer, Tavita and All That (2004) 21 New Zealand Universities Law
Review 66 at 7576, noting the difference between English and New Zealand law on the approach to
statutory interpretation.
22 See, e.g. R. v DPP Ex p. Kebilene [2000] 2 A.C. 326 at 353356 per Laws L.J. in the Divisional
Court.
23 See Rights Brought Home. 1997. Cm 3782, para.2.7.
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intervention, similar rules do not apply in relation to other international

obligations.24 The constitutional understanding in the United Kingdom,
by contrast with New Zealand, has been that development of the law in
this area is primarily for Parliament rather than the courts.25
As is usual with comparative law, therefore, considerable and increasing
caution has to be exercised when reference is made to the case law of such
other jurisdictions, and it cannot be simply and straightforwardly applied
in the English context.
INTERNATIONAL TREATIES
In the United Kingdom, the power to make treaties is an aspect of the
royal prerogative. It vests in the Crown, which acts on the advice of the
Secretary of State for Foreign and Commonwealth Affairs. There is no
requirement for parliamentary approval before a treaty is signed or ratified
by the Secretary of State on behalf of the Crown. The rules established
by such international treaties to which the United Kingdom is party, and
the obligations to which they give rise, are legally binding in international
law, but only in international law.
Unincorporated treaties
There is no general obligation in international law that a treaty must be
incorporated into domestic law.26 The executive has no power to alter
domestic law, and that limitation applies equally to the executive act of
signing and ratifying an international treaty.27 If the performance of treaty
obligations requires the alteration of existing domestic law, legislation
is required. The significance of unincorporated treaties in relation to
domestic law was thoroughly examined in JH Rayner (Mincing Lane
Ltd) v Department of Trade and Industry (the International Tin Council
case).28 The House of Lords reaffirmed that international treaties do
not form part of English law and that, in general, English courts have
24 Also, compare cases concerning the inappropriateness of developing and changing the common law
in a field regulated in a more limited way by Parliament: Johnson v Unisys Ltd [2001] UKHL 13;
[2003] 1 A.C. 518 at [56][59]; Wainwright v Home Office [2003] UKHL 53; [2004] 2 A.C. 406 at
[34]; McKerr [2004] UKHL 12 at [32], [51], [71], [91]; Cullen v Chief Constable of the Royal Ulster
Constabulary [2003] UKHL 39; [2003] 1 W.L.R. 1763 at [75][84]; Watkins v Secretary of State for the
Home Department [2006] UKHL 17; [2006] 2 A.C. 395 at [26], [32], [64].
25 For Australia, see Charlesworth et al., Deep Anxieties (2003) 25 Sydney Law Review 423;
Cranwell, Treaties and Australian LawAdministrative Discretions, Statutes and the Common Law
(2001) Queensland University Technology Law & Justice Journal 49.
26 See, e.g. Matadeen v Pointu [1999] 1 A.C. 98 at 116AD; Observer v United Kingdom (1991) 14
E.H.R.R. 153 at [76].
27 See Maitland, The Constitutional History of England (1908), at p.424; The Parlement Belge (1879)
4 P.D. 129 at 149155 (cf. (1880) 5 P.D. 197 at 204); Att-Gen (Canada) v Att-Gen (Ontario) [1937] A.C.
326, PC, at 347348; JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 A.C.
418 at 476477, 483 (Lord Templeman), 500BC (Lord Oliver of Aylmerton).
28 [1990] 2 A.C. 418.
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no jurisdiction to interpret or apply them. The two governing principles

identified in the leading speech of Lord Oliver of Aylmerton were those
of non-justiciability and no direct effect.
Non-justiciability
In International Tin Council, Lord Oliver observed that domestic courts
have no competence in respect of the legal relations between sovereign
states. Also, the exercise of the royal prerogative in making treaties and
the performance of the obligations created by them are not reviewable
by the domestic courts. Traditionally, the exercise of the vast majority of
the Crowns prerogative powers was non-justiciable. However, the courts
no longer refuse, in principle, to review the exercise of the prerogative
power, and the source of executive power is no longer determinative of its
amenability to judicial review. It is the subject-matter of the power, and
suitability for review in a particular case, that is determinative.29 Making
and breaking treaties,30 the conduct of foreign affairs and the deployment
of the armed forces are still forbidden areas for the courts.31
In R. (on the application of Campaign for Nuclear Disarmament) v
Prime Minister 32 the claimants sought an advisory declaration as to the
true meaning of UN Security Council Resolution 1441 and, in particular,
a declaration as to whether Resolution 1441 authorised states to take
military action in the event of non-compliance by Iraq with its terms. The
question arose whether the application was justiciable. The court held
that domestic courts will not determine the meaning of an international
instrument operating purely on the plane of international law. The only
cases in which the court will pronounce on an issue of international law
are cases where it is necessary to do so in order to determine rights and
obligations under domestic law, so as to draw the court into the field of
international law.33 If there is no point of reference in domestic law to
which the international law issue can be said to go, the courts will not
examine the international instrument. The domestic courts do not have
responsibility or authority at the international level for interpreting and
applying international instruments, and there is a real risk of them reaching
conclusions which would not be accepted by those international organs
29 Council of Civil Service Unions v Minister for the Civil Service [1985] A.C. 374; R. v Secretary of
State for Foreign and Commonwealth Affairs Ex p. Abbasi [2002] EWCA Civ 1598; [2003] U.K.H.R.R.
76 at [85].
30 International Tin Council [1990] 2 A.C. 418 at 499500; Att Gen v Nissan [1970] A.C. 179;
Blackburn v Att-Gen [1971] 1 W.L.R. 1037 at 1040B; R. v HM Treasury Ex p. Smedley [1985] Q.B.
657; Lewis v Att-Gen (Jamaica) [2001] 2 A.C. 50, PC, at 77B.
31 Abbasi [2002] EWCA Civ 1598 at [106(iii)]; R. (on the application of Al Rawi) v Secretary of State
for Foreign and Commonwealth Affairs [2006] EWCA Civ 1279; [2007] 2 W.L.R. 1219.
32 [2002] EWHC 2759.
33 At [36][40], [47(i)] (Simon Brown L.J.). See, e.g. Adan [2001] 2 A.C. 477; Oppenheimer v
Cattermole [1976] A.C. 249; Abbasi [2002] EWCA Civ 1598; Kuwait Airways Corp v Iraqi Airways
Co (Nos 4 and 5) [2002] UKHL 19; [2002] 2 A.C. 883; see also Launder [1997] 1 W.L.R. 839.
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which are in fact given that responsibility. This suggests that domestic
courts should proceed with caution, and only venture to give rulings on the
meaning and application of such instruments if there is some compelling
reason of domestic law that requires them to do so.34
In addition, the courts will not embark upon the determination of
an issue if to do so would be damaging to the public interest in the
field of international relations, national security or defence, as a matter
of the recognition of the limits of judicial expertise, and of the proper
demarcation between the respective responsibilities of the courts and the
executive under domestic constitutional law.35
In Occidental Exploration & Production Co v Ecuador 36 and R. (on the
application of Al-Jedda) v Secretary of State for Defence 37 the courts have
recently considered the question of whether the necessary foothold in
domestic law had been established. In Occidental, arbitrators had made
an award in Occidentals favour under a bilateral investment treaty made
between the United States of America and Ecuador. Ecuador wished
to have that award set aside under s.67 of the Arbitration Act 1996.
Occidental raised the preliminary objection that the challenge required the
English courts to interpret provisions of a treaty, in contravention of the
rule against non-justiciability. In determining whether the interpretation
was necessary, account had to be taken of the special character of
a bilateral investment treaty and the agreement to arbitrate, which was
recognised under English private international law and was subject to the
Arbitration Act 1996. The Court of Appeal held that it was the intention
of the parties to the bilateral investment treaty to create rights in favour of
private investors capable of enforcement in consensual arbitration against
one or other of the signatory states, which was an aim national courts
should aspire to give effect to because it had been agreed by states at an
international level.38 The Court of Appeal relied upon the agreement to
arbitrate which was itself recognised under the rules of English private
international law. The courts were being asked to interpret the scope of
this agreement, which provided the necessary foothold in domestic law
so as to make the claim justiciable. The result appears to represent a
34 As there was in Adan [2001] 2 A.C. 477. Cf. International Tin Council [1990] 2 A.C. 418 at
500501 per Lord Oliver; British Airways v Laker Airways [1985] A.C. 58 at 85 per Lord Diplock;
Smith [1996] Q.B. 517 at 558559 per Sir Thomas Bingham M.R., 564 per Henry L.J.; Briggs v Baptiste
[2000] 2 A.C. 40, PC; R. (on the application of Gentle) v The Prime Minister [2008] UKHL 20 at [8(2)],
[58]. Contracting states may attach considerable importance to the identity of the body with authority
to rule upon treaty provisions: see Fragmentation of International Law: Difficulties Arising from the
Diversification and Expansion of International Law, Report of the Study Group of the International Law
Commission, Finalised by Martii Koskenniemi (April 13, 2006; A/CN.4/L.682), paras 123137. For this
reason also, domestic courts should be slow to assume jurisdiction to do so themselves.
35 At [41][45], [47(ii)] (Simon Brown L.J.), [50] (Maurice Kay J.), [59] (Richards J.); Al Rawi [2006]
EWCA Civ 1279 at [147][148].
36 [2005] EWCA Civ 1116; [2006] Q.B. 432.
37 [2006] EWCA Civ 327; [2007] Q.B. 621; [2007] UKHL 58; [2008] 2 W.L.R. 31.
38 At [32], [37].
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modest extension of an established orthodox approach, since it has long

been recognised that where parties have entered into a domestic contract
in which they have chosen to incorporate the terms of a treaty, the court
may be called upon to interpret the treaty for the purposes of ascertaining
the rights and obligations of the parties under their contract.39
In Al-Jedda, the claimant alleged that his detention in Iraq by British
forces was in breach of Art.5(1) ECHR. The claimant was detained on the
basis that his internment was necessary for imperative reasons of security
in Iraq, and was authorised under UN Security Council Resolution 1546.
The defendant contended that the Resolution qualified the rights contained
in the ECHR through the operation of Art.103 of the UN Charter, and
that the Human Rights Act 1998 afforded the claimant only those rights
that would be acknowledged by the ECtHR. The necessary foothold in
domestic law came from Art.5(1) ECHR, as set out in the Human Rights
Act. Under the Act, Convention rights are only applicable to the extent that
they would be recognised on the international law plane as having effect
in relation to the United Kingdom.40 Therefore, as a matter of domestic
law, the courts were required to examine the effect in international law
of the Resolution on the rights under the ECHR.
No direct effect
The second principle identified in International Tin Council is that of no
direct effect.41 As set out above, a treaty is not part of domestic law
unless and until it has been incorporated into that law by legislation. As a
source of rights and obligations, an unincorporated treaty is irrelevant.42
Treaties, made by exercise of the royal prerogative, cannot create directly
enforceable rights in domestic law43 ; nor can they deprive individuals of
existing domestic law rights.44
This principle was reaffirmed by the House of Lords in R. v Secretary of
State for the Home Department Ex p. Brind 45 and, more recently, in R. v
39 International Tin Council [1990] 2 A.C. 418 at 500F; Phillipson v Imperial Airways Ltd [1939] A.C.
332.
40 Compare R. (on the application of Quark Fishing Ltd) v Secretary of State for Foreign and
Commonwealth Affairs [2005] UKHL 57; [2006] 1 A.C. 529 at [25], [33][34], [88]. This point had
become common ground by the time the case reached the House of Lords: see [2007] UKHL 58; [2008]
2 W.L.R. 31 at [51][55] (Lord Rodger of Earlsferry).
41 We leave aside special cases, such as treaties of peace and cession of territory, which may in certain
situations produce domestic legal effects.
42 International Tin Council [1990] 2 A.C. 418 at 499500; also e.g. Att-Gen (Canada) v Att-Gen
(Ontario) [1937] A.C. 326 at 347348; Hoani Te Heuheu Tukino v Aotea District Maori Land Board
[1941] A.C. 308, PC, at 324325; British Airways v Laker Airways [1984] Q.B. 142 at 192; Winfat v
Att-Gen (Hong Kong) [1985] A.C. 733, PC, at 746.
43 e.g. Rustomjee v The Queen (1876) L.R. 2 Q.B.D. 69.
44 e.g. Walker v Baird [1892] A.C. 491.
45 [1991] 1 A.C. 696 at 747748 (Lord Bridge of Harwich), 762BD (Lord Ackner); NALGO (1992)
5 Admin. L.R. 785 at 798.
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Lyons 46 and Re McKerr.47 In Brind and McKerr, the House of Lords held
(for the period before the Human Rights Act 1998) that the ECHR could
not be a source of rights and obligations in domestic law. The courts
had no power to enforce Convention rights binding under international
law directly in domestic law. In Lyons, both Lord Bingham of Cornhill
and Lord Hoffmann expressly held that rules of international law not
incorporated into national law confer no rights on individuals directly
enforceable in national courts.48 Consequently, judgments of international
tribunals declaring the United Kingdom to be in breach of its international
obligations are also of no direct effect in domestic law. Lord Hoffmann
dismissed the argument that, as the courts are an organ of the state, they
were obliged to give effect to the states international obligations. He
observed that international law does not ordinarily take account of the
internal distribution of power within a state, i.e. its constitutional rules. A
rule of international law may be infringed by any state organ, including by
the actions of the Crown, Parliament or the courts. However, the domestic
constitution is based upon the separation of powers. In domestic law, the
courts are obliged to give effect to the law as enacted by Parliament. This
obligation under domestic law is unaffected by international law.49
No separate treatment of unincorporated human rights treaties
In Re McKerr 50 Lord Steyn cast doubt on the applicability of the
fundamental principles set out in International Tin Council so far as
they governed the position in relation to human rights treaties. While
acknowledging that the point had not been the subject of argument, Lord
Steyn referred to some academic criticism of International Tin Council
and highlighted what he termed growing support for the view that human
rights treaties enjoy a special status, citing the views of Murray Hunt51
and extra-judicial comments of Lawrence Collins J.52
Contrary to these views, with respect, there is no basis in authority or
principle for a distinction between human rights treaties, however they
46 [2002] UKHL 44; [2003] 1 A.C. 976. See also Fisher v Minister of Public Safety and Immigration
(No.2) [2000] 1 A.C. 434, PC, at 445, and Higgs v Minister of National Security [2000] 2 A.C. 228, PC,
at 241. The rule was also implicitly reaffirmed by the House of Lords in its decisions in Launder [1997]
1 W.L.R. 839 at 866867 (reference to the ECHR was relevant only because the Secretary of State had
chosen to direct himself by reference to it) and Kebilene [2000] 2 A.C. 326 at 567 (Lord Steyn), 375376
(Lord Hope), approving the application of Launder by Lord Bingham C.J. (at 340342) and Laws L.J.
(at 352) in the Divisional Court.
47 [2004] UKHL 12; [2004] 1 W.L.R. 807: see at [25] (Lord Nicholls of Birkenhead), [48] (Lord
Steyn), [63] (Lord Hoffmann), [80] (Lord Rodger) and [90] (Lord Brown of Eaton-under-Heywood).
48 Lyons [2002] UKHL 44 at [13] and [27], respectively.
49 Lyons [2002] UKHL 44 at [40].
50 [2004] UKHL 12; [2004] 1 W.L.R. 807 at [49][50].
51 Using Human Rights Law in English Courts (1998), at pp.2628.
52 In Foreign Relations and the Judiciary (2002) 51 I.C.L.Q. 485 at 496; also see his comments in
R. (on the application of Lika) v Secretary of State for the Home Department [2002] EWCA Civ 1855
at [31]. Lord Steyns suggestion is not compatible with the views of the other members of the appellate
committee in McKerr [2004] UKHL 12.
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are to be defined,53 and all other treaties in terms of their legal effect as
a matter of English law. The formulation of the relevant principle in the
authorities cited above does not draw, and the constitutional rationale for
that principle does not justify, any distinction between treaties conferring
rights on individuals and other treaties. International Tin Council was
itself about an attempt to assert rights of persons under a treaty against
a government department. Moreover, the principle has been consistently
applied to human rights treaties, in particular the ECHR, both before and
after International Tin Council.54 Lord Steyn in Re McKerr suggested
that the relevant rule was that enunciated by the House of Lords in
the International Tin Council case, which might itself be reviewed; but
International Tin Council merely reaffirmed an already well-established
rule of domestic constitutional law.
As to the rationale for that rule, Lord Steyn gives no good reason for
saying it does not apply in relation to human rights treaties. A number of
points should be made in response to Lord Steyns proposed modification
of the usual rule. First, with respect, at [50], Lord Steyn misstates the
rationale for the dualist theory which underpins International Tin Council.
He identified the rationale as being
that any inroad on it would risk abuses by the executive to
the detriment of citizens. It is, however, difficult to see what
relevance this has to international human rights treaties which create
fundamental rights for individuals against the state.
But this is not the rationale for the dualist theory. The true rationale is that
the Crown cannot change domestic law by the exercise of its powers under
the prerogative, which is a rule reflecting and supporting the sovereignty
of Parliament and its primacy as the domestic law-making institution in
our constitution. Rights, powers and duties may not be legislated for and
treated as conferred or imposed on anyone (private citizens or public
bodies) on whom Parliament has not chosen to confer or impose them.
Secondly, Lord Steyn suggests that the recognition of human rights
treaties as directly enforceable in domestic law would impose no
detriment on citizens, only benefits. But rights are accompanied by duties.
Respecting human rights imposes costs, both financial and in terms of
other public interests which are subordinated to them, that others in society
will have to bear. Laws L.J. expressed this point succinctly in the Court
53 It is not obvious that there is any clear, workable test to identify which treaties would qualify for
special treatment.
54 See Haoni Te Heuheu Tukino v Aotea District Maori Land Board [1941] A.C. 308, PC, at 324325;
Malone v Metropolitan Police Commissioner [1979] Ch. 344 at 378379; Re H and M (Minors) [1990]
1 A.C. 686 at 7212; Brind [1991] 1 A.C. 696 at 747H; Smith [1996] Q.B. 517; R. v Khan [1997] A.C.
558 at 579582; Lyons [2002] UKHL 44 at [13], [27], [39][40], [104]; and McKerr [2004] UKHL 12
at [25], [63], [66], [80] and [96].
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of Appeal in R. (on the application of European Roma Rights Centre)

v Immigration Officer at Prague Airport (Roma Rights)55 : the rule
[in International Tin Council ] applies no less where the treaty under
consideration confers advantages; advantages here are burdens there.
Discharging positive obligations is not cost free. Similarly, negative
obligations impose costs in the form of curtailing freedom to pursue other
goals. The costs in question may be justified in a general, political sense,
but the choices to be made are frequently controversial, as the protracted
gestation of, and debates about, the Human Rights Act 1998 illustrate.
Thirdly, in many cases Lord Steyns suggestion would have the effect of
creating a charge on the public purse, which the courts have consistently
held cannot be done by treaty alone.56 By another well-established
constitutional principle, it is for Parliament alone to authorise expenditure
of public monies.57 If introduction of human rights laws into domestic law
will involve financial costs to be met out of the public purse and taxation
(as it will), it is again necessary that the decision to assume those burdens
should be by the relevant representative institution, namely Parliament.
Finally, making all human rights treaties enforceable as a matter of
domestic law in the courts would involve an illegitimate exercise of a
legislative function by the courts. Different international treaties have
different mechanisms for enforcement, some of which have been accepted
by the United Kingdom as a matter of international law. However, for the
courts to determine that all human rights treaties are directly enforceable
in the courts of this country would result in the courts themselves
determining whether, to what extent and how rights embodied in or arising
from treaties should be justiciable and enforceable.
Incorporated treaty provisions
There is a rising trend in the extent to which domestic legislation
incorporates international treaties and makes them part of domestic law.58
In constitutional terms, this is unexceptionable and we can deal with
it shortly. As Lord Steyn emphasised in Roma Rights, there is no rule
specifying the precise legislative method of incorporation.59 Treaties may
be incorporated into domestic law by a variety of means.
For example, a statute may set out treaty terms and provide that
they are to apply in domestic law, or may include a provision with
55 [2003] EWCA Civ 666; [2004] Q.B. 811 at [97].
56 See Halsburys Laws of England, 4th edn reissue, Vol. 8(2), Constitutional Law and Human Rights,
para.228.
57 See Dicey, Introduction to the Study of the Law of the Constitution, 10th edn (1959), at pp.315318;
Erskine May, Parliamentary Practice, 22nd edn (1997), pp.732737; Steele Ford & Newton v Crown
Prosecution Service (No.2) [1994] 1 A.C. 22 at 33DG and 41C (Lord Bridge).
58 Fatima, Using International Law in Domestic Courts (2005), Ch.3.
59 [2004] UKHL 55; [2005] 2 A.C. 1 at [42].
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an autonomous meaning taken from the treaty itself. In R. (on the

application of Mullen) v Secretary of State for the Home Department,60
the statutory provision in question was enacted to give effect in domestic
law to the United Kingdoms obligations under Art.14(6) ICCPR. The
expression miscarriage of justice in the statute was drawn directly from
the English language text of Art.14(6), and incorporated the autonomous
treaty meaning of that expression. The key to the interpretation of
the statute was therefore a correct understanding of Art.14(6).61 Where
Parliament has clearly drawn upon a treaty when formulating domestic
legislation, a provision in the treaty may be a particularly strong guide
to the meaning which Parliament intended the domestic provision to
bear.
Warning has been given that the metaphor of incorporation may be
misleading, for it is not the international treaty, but the Act of Parliament,
that forms part of domestic law.62 What is important from the perspective
of constitutional law is that Parliament has indicated, in domestic
legislation, that the courts should give effect to international treaty
provisions. Once Parliament has chosen to give effect to international
treaty obligations in domestic law, the courts must apply the provisions
of domestic legislation interpreted in the light of those treaty obligations.63
60 [2004] UKHL 18; [2005] 1 A.C. 1.

61 Mullen [2004] UKHL 18 at [5] and [9] (Lord Bingham), [35][36] (Lord Steyn). See also R. (on
the application of G) v Barnet LBC [2003] UKHL 57; [2004] 2 A.C. 208 at [68].
62 Lyons [2002] UKHL 44 at [27] (Lord Hoffmann).
63 The courts are then required to look for the autonomous international meaning of the treaty, rather
than to apply domestic rules of interpretation: Adan [2001] 2 A.C. 477 at 517; Re H [1998] A.C. 72 at
87DG; Roma Rights [2004] UKHL 55; [2005] 2 A.C. 1 at [11][19], [43], [57][71]. Some treaties are
regarded as living instruments, which must be interpreted in the light of present day conditions: see,
e.g. Brown v Stott [2003] 1 A.C. 681 at 727EF (Lord Hope); Roma Rights at [43] (Lord Steyn). There is
a similar, but (it would seem) much narrower rule (see Bennion, Statutory Interpretation 4th edn (2002).,
pp.762 et seq.), that statutes are regarded as always speaking, which enables their application to be
varied to some extent as conditions change over time. If the content of the international obligation changes
over time, an important issue may arise whether the usual, narrow rule permitting modification of the
meaning of a statute is to be treated as including reference to the changing content of the international
provision. This may depend upon indications of the extent to which Parliament intended the statute
directly to reflect the relevant international provision, or intended to establish a clear and determinate
(and essentially unchanging) rule in the domestic legal order. Where a treaty is incorporated by some
form of direct reference, the usual expectation is that the content of the statutory rule changes in line with
changes in the content of the international obligation: see, e.g. Morris v KLM Dutch Airlines [2002] UKHL
7; [2002] 2 A.C. 628; R. v Immigration Appeal Tribunal Ex p. Shah [1999] 2 A.C. 629; and compare
Boyce v The Queen [2004] UKPC 32; [2005] 1 A.C. 400, at [25][26]. In relation to the interpretation
of constitutions, there may be wider scope for reference to changing international obligations: Boyce v
The Queen at [25][26], [55]; Matthew v Trinidad and Tobago [2004] UKPC 33; [2005] 1 A.C. 433 and
Watson v The Queen [2004] UKPC 34; [2005] 1 A.C. 472. The position is likely to be different from both
these cases where Parliament has not demonstrated an intention to give direct effect to those obligations in
the statute in question: see R. v Brown [1994] 1 A.C. 212 at 256EF; and compare R. (on the application
of Middleton) v West Somerset Coroner [2004] UKHL 10; [2004] 2 A.C. 182; Hurst [2007] UKHL 13;
and Jordan v Lord Chancellor [2007] UKHL 14,;[2007] 2 A.C. 226; also see Abdirahman v Secretary of
State for Work and Pensions [2007] EWCA Civ 657; [2008] 1 W.L.R. 254 and Boake Allen Ltd v Revenue
and Customs Commissioners [2007] UKHL 25; [2007] 1 W.L.R. 1386 at [51] (Lord Neuberger).
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Unincorporated treaties as an aid to statutory interpretation

When the courts are concerned with the interpretation of a statute in a field
where the United Kingdom is bound by international treaty obligations,64
where a provision of the statute is ambiguous there is a presumption
(which may operate alongside, and have to be weighed against, other
presumptions) that Parliament intended to legislate in a manner which does
not involve breach of those treaty obligations. In New Zealand, a different
and especially strong principle of statutory interpretation is applied, more
akin to the approach applicable in the United Kingdom under s.3(1) of
the Human Rights Act, according to which general words in legislation
which is not ambiguous may be read down, or additional words read
into such legislation, in order to produce compatibility with obligations
under international law: see Sellers v Maritime Safety Inspector.65 But
in English law, the requirement of ambiguity in the legislation as the
pre-condition for application of the presumption of compatibility is well
established.66 It is a further reflection of the underlying concern in English
constitutional law (subject to legislative modification) to protect and
respect the sovereignty of Parliament: Parliament should be taken to mean
what it says in unambiguous terms, and the construction of clear legislation
should not be modified by the courts in light of the United Kingdoms
international obligations.
Unincorporated treaties and the development of the common law
The common law is a living system of law, reacting to new circumstances
and new ideas. The courts may develop the common law in the perceived
interests of justice, although they must
act within the confines of the doctrine of precedent . . . the change
so made must be seen as a development, usually a very modest
development, of existing principle and so can take its place as a
congruent part of the common law web as a whole. 67
64 The same approach would apply in relation to obligations under CIL (at least, to the extent that they
were clearly established and perceived to be obligations at the time when Parliament legislated).
65 [1999] 2 N.Z.L.R. 44, CA.
66 The classic statement is that by Diplock L.J. in Salomon v Commissioners of Customs and Excise
[1967] 2 Q.B. 116 at 143EG. See also, among many authorities, Collco Dealings Ltd v Inland Revenue
Commissioners [1962] A.C. 1 at 19; Quazi v Quazi [1980] A.C. 744 at 808DE; International Tin Council
[1990] 2 A.C. 418 at 481FH, 500E; Brind [1991] 1 A.C. 696 at 747749, 760DG; Brown [1994] 1
A.C. 212 at 256EF; JA Pye (Oxford) Ltd v Graham [2002] UKHL 30; [2003] 1 A.C. 419 at [65]; Lyons
[2002] UKHL 44 at [13]; Boyce [2004] UKPC 32 at [25] and [81]; Abdirahman [2007] EWCA Civ
657 at [35][40]. It does not appear that Lord Diplock, in using a somewhat different formulation of the
principle in Garland v British Rail Engineering Ltd [1983] 2 A.C. 751 at 771, intended to depart from
the established substantive law on this point. Similarly, in Lyons, at [27], Lord Hoffmann referred, obiter,
to the presumption as a strong presumption, but it does not appear that he intended thereby to weaken
the threshold condition for application of the presumption of ambiguity in the provisions to be construed.
67 Kleinwort Benson v Lincoln City Council [1999] 2 A.C. 349 at 377378.
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Unincorporated treaties (and obligations arising under CIL) may have a

bearing upon the process of development of the common law.68 If and
to the extent that development of the common law is called for, such
development should ordinarily be in harmony with the United Kingdoms
international obligations and not antithetical to them: A v Secretary of
State for the Home Department (No.2).69 The courts are under a duty,
when free to do so, to interpret the common law in accordance with the
international law obligations of the state.70 Treaties may also be used
to resolve uncertainties in the common law.71 This may be regarded
as a principle analogous to the use of unincorporated treaties as an aid
to the construction of ambiguous legislation, save that in this context
the limit upon the courts powers is that inherent in the common law
itself as distinct from being derived from the principle of parliamentary
sovereignty.
A treaty is only relevant to the extent that it may provide guidance in
relation to a capacity for development already inherent in the common law
itself. In that role, a treaty may (when weighed along with other factors)
provide a perspective or a formulation of values capable of informing the
general assessment of justice which the courts struggle to achieve when
seeking a direction for development of the common law.72
However, the common law cannot be used to achieve a backdoor
incorporation of international treaties.73 Nor is it permissible for the
courts to develop the common law in a direction which is contrary
to legislation,74 or in a field in which Parliament has itself already
intervened to strike the relevant balance between competing interests75 or
where Parliament has abstained from legislating in a complex area where
development of the law ought appropriately to be left for the legislature
(notwithstanding the existence of relevant treaty obligations).76 In short,
68 Lyons [2002] UKHL 44 at [13] (Lord Bingham).
69 [2005] UKHL 71; [2006] 2 A.C. 221 at [27] (Lord Bingham).
70 Att-Gen v Guardian Newspapers (No.2) [1990] 1 A.C. 109 at 238. It was on the basis of a legitimate
development of the common law that the Court of Appeal explained its decision to limit jury awards in
defamation cases by reference to Art.10 ECHR in Rantzen v Mirror Group Newspapers Ltd [1994] Q.B.
670 at 692.
71 Derbyshire CC v Times Newspapers Ltd [1993] A.C. 534. See also DPP v Jones [1999] 2 A.C. 240
at 265DF (Lord Slynn), 277E278F (Lord Hope): reference to the ECHR for guidance was found to be
inappropriate in context as there was no doubt about the content of the common law.
72 See D v East Berkshire Community NHS Trust [2005] UKHL 23; [2005] 2 A.C. 373; Kay v Lambeth
LBC [2006] UKHL 10; [2006] 2 A.C. 465 at [45]. Cf. R. v G [2003] UKHL 50; [2004] 1 A.C. 1034 at
[53].
73 See A v Secretary of State for the Home Department (No.2) [2004] EWCA Civ 1123; [2005] 1 W.L.R.
414 at [266][267] (Laws L.J.), [434] (Neuberger L.J.).
74 R. v Chief Constable of the Royal Ulster Constabulary Ex p. Begley [1971] 1 W.L.R. 1475, HL, at
1480 (Lord Browne-Wilkinson).
75 Wainwright v Home Office [2003] UKHL 53 at [34]; McKerr [2004] UKHL 12 at [32], [51], [71],
[91]; Cullen v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 39 at [75][84]; Watkins
v Secretary of State for the Home Department [2006] UKHL 17 at [26], [32], [64].
76 Malone [1979] Ch. 344 at 372381; Wainwright [2003] UKHL 53.
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all the usual restrictions upon the ability of the courts to develop the
common law apply equally here.
Unincorporated treaties and the exercise of administrative discretion
The general position in English law is that administrative decisionmakers who have a discretion conferred upon them by statute are
not obliged to comply with or have regard to the United Kingdoms
international law obligations when exercising their discretion, but that
they may lawfully at their own choice elect to do so.77 Put another
way, the general position is that in relation to the exercise of a
statutory discretion such international obligations are neither mandatory
relevant considerations, nor mandatory irrelevant considerations, but are
considerations which may be taken into account and treated as relevant
at the option of the decision-maker (i.e. are considerations which fall
within the class of optional relevant considerations identified by Cooke
J. in CREEDNZ v Governor General 78 ). However, it is always a matter
of construction of the relevant statute whether any consideration is to
be treated as a mandatory relevant consideration, a mandatory irrelevant
consideration or an optional consideration for the exercise of the discretion
in question, so this general position may be departed from in particular
contexts.79
If decision-makers do choose to have regard to the United Kingdoms
international law obligations when exercising their discretion, there is
authority that they will be required by the courts to interpret them correctlyand the courts will therefore construe and apply treaty provisions
themselves in such a case: see Launder, in which this approach was justified by reference to the domestic law anxious scrutiny principle in a case
concerning an individuals human rights and to Art.13 ECHR regarding
the obligation to provide an effective remedy in the domestic legal order
(which was presumably relevant on the basis that this was an example
of the proper approach under the common law being influenced by an
77 Brind [1991] 1 A.C. 696; Smith [1996] Q.B. 517 at 558; Launder [1997] 1 W.L.R. 839; Hurst
[2007] UKHL 13. It was observed by Lord Denning M.R. in R. v Chief Immigration Officer, Heathrow
Airport Ex p. Salamat Bibi [1976] 1 W.L.R. 979 at 985A, that it is not realistic to expect administrative
decision-makers to know and apply all of the UKs international obligations which might be relevant to
their decisions.
78 [1981] 1 N.Z.L.R. 172 at 183; Re Findlay [1985] A.C. 318 at 334; Hurst [2007] UKHL 13 at
[57][59]; and Al Rawi [2006] EWCA Civ 1279 at [131] (in relation to the exercise of discretions which
exist under the prerogative).
79 International obligations may in a particular context be mandatory relevant considerations: see, e.g.
R. v Secretary of State for the Home Department Ex p. Norney, unreported, Dyson J., September 28, 1995,
at pp.1314 of the transcript; R. v Secretary of State for the Home Department Ex p. Fininvest SpA [1997]
1 W.L.R. 743; Hurst [2007] UKHL 13 at [57][58]. In another context, they may be mandatory irrelevant
considerations, if Parliament has specified clearly what the decision-maker may and may not have regard
to: see, e.g. R. (on the application of Marchiori) v Environment Agency [2002] EWCA Civ 3; [2002] Eu.
L.R. 225 at [48].
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international obligation: see above).80 It is unclear to what extent the

approach in Launder may be applied in other cases where decision-makers
refer to international obligations but these factors are not applicable and
to what extent the non-justiciability principle referred to in International
Tin Council and other established constitutional principles might limit
the operation of the rule in Launder. For example, if Ministers decide
that military action should be taken abroad (an area in which the domestic courts have traditionally declined to exercise any substantive powers
of review81 ), and (as will almost inevitably be the case) they take legal
advice about the legality of that course in international law when taking related decisions under domestic law discretionary powers, does that
provide a sufficient basis for the domestic courts to rule upon that question of international law, so that (if a court considers that the advice
received by Ministers is wrong) the court may compel them to reconsider whether such action may be taken or such discretionary powers be
exercised in support of it? Such a result might be thought surprisingparticularly when one also takes into account the international political
dimension, in which sensitive diplomacy in the national interest seeking
to attract international support for the action in question might be badly
undermined by a legal ruling on the point adverse to the government.82
Such considerations led the Divisional Court in Campaign for Nuclear
Disarmament to decline to rule on the meaning of UN Security Council
Resolution 1441 at a point in time when diplomatic negotiations were
proceeding, but the degree to which its reasoning might be extended to
displace the rule in Launder once other forms of action are to be taken
by the executive is uncertain. Part of the problem here is that the executive may not have any practical option but to direct itself by reference
to international law, and if the rule in Launder is treated as unlimited it
will lead to very extensive direct application of treaties and international
law in the domestic courts, thereby for practical purposes undermining the
basic constitutional principle about non-enforceability of unincorporated
treaties. One solution might be for the domestic courts, in recognition of
the limits of their competence to provide a fully authoritative ruling on
80 [1997] 1 W.L.R. 839 at 867CF (Lord Hope); and see Kebilene [2000] 2 A.C. 326 at 367DG (Lord
Steyn), 375F376A (Lord Hope); R. (on the application of Mahmood) v Secretary of State for the Home
Department [2001] 1 W.L.R. 840, CA, at [36] (Lord Phillips M.R.); Gentle [2008] UKHL 20 at [26]
(Lord Hope); R. (on the application of Corner House Research) v Director of the SFO [2008] EWHC 714
(Admin) at [113] et seq. The approach in Launder represents a major in-road upon the non-justiciability
principle, and does not appear to have been the subject of significant debate in that case or subsequently.
For central government in particular, where Ministers may often seek advice about and direct themselves
by reference to the UKs international obligations, the practical effect of Launder in making international
law the subject of domestic legal proceedings is potentially considerable.
81 Council of Civil Service Unions [1985] A.C. 374.
82 Which ruling might itself be overturned later on appeal, but after the damage has been done. On
the inevitable interconnection between the stance adopted on disputed questions of international law and
international diplomacy and politics, see Campaign for Nuclear Disarmament [2002] EWHC 2759 at
[11][12], [37][39], [41] and [43].
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the point, the limits of their competence under domestic constitutional

arrangements to rule on the subject-matter in question and the dangers
posed to the national interest by them ruling definitively on the point at
all,83 either to decline to rule or to allow the executive a form of margin
of appreciation on the legal question, and to examine only whether a
tenable view has been adopted on the point of international law (rather
than ruling on it themselves, as if it were a hard-edged point of domestic
law). This is the approach which has been adopted by the ECtHR, when
it has to examine questions of international law which it does not have
jurisdiction to determine authoritatively itself.84 Adoption of a tenable
view approach would be a wayunder circumstances where the proper
interpretation of international law is uncertain, the domestic courts have
no authority under international law to resolve the issue and the executive has responsibility within the domestic legal order for management
of the United Kingdoms international affairs (including the adoption of
positions to promote particular outcomes on doubtful points of international law)to allow space to the executive to seek to press for legal
interpretations on the international plane to favour the United Kingdoms
national interest, while also providing a degree of judicial control to ensure
that the positions adopted are not beyond what is reasonable. Where the
relevant issue of international law affects many states, adoption of such
an approach might also provide a method for domestic courts to afford
respect to the principle of comity85 while retaining a power of review on
this basis over domestic public authorities. How criteria to limit application of the rule in Launder might be spelled out is difficult to predict.
Perhaps the choice between the English courts seeking to adjudicate the
point of international law, or allowing the executive a margin of appreciation, or not examining the issue at all, should depend upon the intensity
of judicial scrutiny judged appropriate in domestic law terms in the particular context. In Campaign for Nuclear Disarmament the court discussed
the rule in Launder without directly qualifying it86 ; but at the same time
it was observed that any future decision to take military action would
be beyond the courts purview.87 It would appear that this firm statement could only be correct if the rule in Launder is indeed to be treated
83 Since foreign states may in some contexts consider the adoption by the UK of a particular
interpretation of international law to be a hostile act, and are unlikely to distinguish between the executive
and judicial arms of government in that regard: cf. Campaign for Nuclear Disarmament [2002] EWHC
2759 at [37], [41] and [43].
84 See Behrami v France (2007) 45 E.H.R.R. SE10 at [122]; cf. Brannigan and McBride v United
Kingdom (1994) 17 E.H.R.R. 539 at [72].
85 Seeking not to rule upon legal positions adopted by other states, cf. Campaign for Nuclear
Disarmament [2002] EWHC 2759 at [37][39]; Gentle [2008] UKHL 20 at [8(2)], [58].
86 [2002] EWHC 2759 at [33][34] (Simon Brown L.J.); [61(iv)] (Richards J.).
87 [2002] EWHC 2759 at [15] (Simon Brown L.J., also at [47(iii)]); [50] (Maurice Kay J.); [59(ii)]
(Richards J.). See also Chandler v DPP [1964] A.C. 763 at 790791, 796, 798799, 800, 807, 809810;
Council of Civil Service Unions [1985] A.C. 374 at 398, 407, 411, 418; Marchiori [2002] EWCA Civ 3;
[2002] Eu. L.R. 225 at [38]; R. (on the application of Gentle) v Prime Minister [2006] EWCA Civ 1689
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as limited by reference to more general principles of domestic constitutional law, which limit the potential role of the courts in this area.
So the simple proposition in Launder should be regarded as potentially
problematic, and as requiring fuller examination at some point in the
future.
Unincorporated treaties and legitimate expectations
A decision-maker exercising discretionary power in the area of public law
may create a legitimate expectation on the part of a person affected by
the exercise of that power as to the manner in which the power will be
exercised. This may occur on the basis of a promise or representation
made by the decision-maker. Typical examples are a policy statement
issued by the decision-maker as to the procedures to be adopted before
the power is exercised, or as to the way in which the power will be
exercised, or a specific assurance to a particular individual how its power
will be used. The legitimate expectation fostered may be as to a benefit
which the decision-maker will in fact confer when it comes to exercise
its discretionary power (a substantive expectation) or as to the procedure
which the decision-maker will adopt before taking the decision how to
exercise its discretionary power (a procedural expectation).88
The courts have considered whether the ratification of an unincorporated
treaty can generate a legitimate expectation that future executive decisionmaking would be compatible with unincorporated treaty obligations. In
Chundawadra v Immigration Appeal Tribunal 89 it was argued that every
citizen had a legitimate expectation that, if the ECHR was relevant to a
matter under consideration, the Minister would take it into account when
deciding how to exercise his powers. The Court of Appeal refused to
accept this argument, holding that it was not appropriate to introduce the
Convention into domestic law by the back door of legitimate expectation
when the front door was firmly barred.
Following the decision of the High Court of Australia in Minister of
State for Immigration v Teoh,90 arguments about legitimate expectation
and unincorporated treaties in the English courts were given renewed
vigour. A majority of the High Court in Teoh held that ratification of
the UN Convention on the Rights of the Child by the Executive could
give rise to a legitimate expectation that the Minister would act in
conformity with it. The High Court rearticulated the orthodox position in
at [26] et seq.; R. (on the application of Bancoult) v Secretary of State for Foreign and Commonwealth
Affairs (No.2) [2007] EWCA Civ 498; [2007] 3 W.L.R. 768 at [102] (Waller L.J.); [117][118] (Sir
Anthony Clarke M.R.); cf. [46] (Sedley L.J.).
88 see P. Sales and K. Steyn, Legitimate Expectations in English Public Law: an Analysis [2004]
P.L. 564 at 565.
89 [1998] Imm. A.R. 161.
90 (1995) 183 C.L.R. 273
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respect of unincorporated treaties in domestic law. However, the majority

employed the concept of legitimate expectation to extend the law, taking
the view that ratification of a treaty should not be dismissed as a merely
platitudinous or ineffectual act.91 The majority expressed the view that
ratification of an international treaty was a positive statement by the
Executive government to the world and to the Australian people that the
Executive government and its agencies will act in accordance with the
treaty. Mason C.J. and Deane J. jointly held92 that that positive statement
was an adequate foundation for a legitimate expectationabsent statutory
or executive indications to the contrarythat administrative decisionmakers would act in conformity with the international treaty.93 The High
Court denied that it was giving the provisions of a treaty the domestic legal
status of a rule of law, as it was not compelling a decision-maker to act
in accordance with the treaty. Rather, the effect of its judgment was that a
procedural legitimate expectation had been generated by the ratification:
i.e. if a decision-maker proposed to make a decision that was inconsistent
with the expectation, procedural fairness required that the persons affected
be given notice and an adequate opportunity of presenting a case against
that course of action.
Arguments based on Teoh were considered by the Court of Appeal
in England in Behluli v Secretary of State for the Home Department.94
The Court of Appeal expressly declined to follow Teoh, opting instead to
reaffirm orthodox domestic constitutional principles. Mere ratification of
a treaty could not generate a legitimate expectation that the treaty would
be followed.
However, two months later, a different division of the Court of
Appeal indicated a willingness to adopt and follow Teoh in relation to
decisions taken under the royal prerogative. In R. v Secretary of State
for the Home Department Ex p. Ahmed and Patel,95 the Court of Appeal
held that the entering into a treaty by the Crown could give rise to a
legitimate expectation on which the public in general were entitled to rely
because, subject to any indication to the contrary, ratification amounted
to a representation that the Crown would act in accordance with any
91 Per Mason C.J. and Deane J. at 291, citing Tavita [1994] 2 N.Z.L.R. 257 (see text at fn.19 above).
But clearly, at the level of international law, the ratification of a treaty is not a platitudinous or ineffectual
act, since it creates rights and obligations under international law: see, Ex p. Lam (2003) 214 C.L.R. 1
at [98] (McHugh and Gummow JJ.). However, since the Crown has no power to change domestic law,
the orthodox position is indeed that the ratification of a treaty does not create rights or obligations under
domestic law and hence is ineffectual at that level. Further, as Tavita has not been followed in English
law, the authority of Teoh in England is questionable on that ground, among others.
92 Toohey J. gave a concurring judgment, also relying upon Tavita [1994] 2 N.Z.L.R. 257 as authority
for his view (at 300301); Gummow J. reached the same result by a different route; McHugh J. gave a
strong dissenting judgment.
93 For discussion of statutory or executive indications to the contrary, see e.g. Wendy Lacey, In the
Wake of Teoh: Finding an Appropriate Government Response [2001] Fed.L.Rev. 9.
94 [1998] Imm. A.R. 407 at 415
95 [1998] I.N.L.R. 570
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obligations it accepted under the relevant treaty. The Divisional Court

followed this approach in R. v Uxbridge Magistrates Court Ex p. Adimi, to
produce the remarkable result that offences defined by statute were treated
as unprosecutable because of the terms of an unincorporated treaty.96
We respectfully submit thatto the extent that they adopt the approach
in TeohAhmed and Adimi are wrongly decided in English law, both for
reasons of principle, and because they cannot be reconciled with decisions
of the House of Lords and the Privy Council. Indeed, subsequent decisions
of the Australian courts, in particular that of the High Court in Re Minister
for Immigration and Multicultural Affairs Ex p. Lam,97 have recognised
that the decision in Teoh is inconsistent with other authorities and is itself
doubtful. The decision of the Court of Appeal in Behluli, declining to
follow Teoh in English law, should be preferred.
Ratification of an unincorporated treaty does not give rise to a legitimate
expectation enforceable in domestic law for the following reasons. First,
the concept of a legitimate expectation is inapt to apply in the context of
English public law to the assumption of obligations under a treaty by the
United Kingdom. The first question to ask in any legitimate expectation
case is precisely to what the relevant decision-maker (whose discretion is
to be exercised) has committed itself.98 Ratification of a treaty involves
the acceptance by one state of obligations on the plane of international
law. However, ratification is not intended to operate other than on that
plane. When and how those undertakings will be given effect in the United
Kingdom is essentially a matter for Parliament. Precisely because under
English law it is established that a treaty has no force in domestic law
and is incapable of operating as a direct source of rights or obligations,
ratification does not constitute a representation or undertaking operating
on the plane of domestic law to perform obligations under the treaty.
In the Divisional Court in R. v DPP Ex p. Kebilene Lord Bingham C.J.
rejected an attempt to base a legitimate expectation on the ratification of
the ECHR, observing that ratification took place nearly half a century ago
at a time when it was generally assumed that ratification would have no
practical effect on British law or practice.99 In light of basic constitutional
principle, it is difficult to see why any different approach should apply in
96 [2001] Q.B. 667, DC, at 686 (Simon Brown L.J.), 690691 (Newman J.). It does not appear that
there was full argument on the point, and neither Chandawadra nor Behluli were cited to the court.
Simon Brown L.J. sounded a note of caution about Adimi in Roma Rights in the Court of Appeal, [2003]
EWCA Civ 666 at [51], where he described his views in Adimi as at best superficial and suspect.
97 (2003) 214 C.L.R. 1, per McHugh and Gummow J. at [98][102], Hayne J. at [120][122], Callinan
J. at [139][140], [145], [147], [152]; the decision in Teoh is now perceived to be difficult to reconcile with
basic ideas of the separation of powers in Australian law: see esp. at [102], [147]. See also Application
of O and P [2005] NSWCC 1297 at [66][77]. For Ireland, compare Kavanagh v Governor of Mountjoy
Prison [2002] 3 I.R. 97, esp. at [43].
98 R (Bibi) v Newham London Borough Council [2002] 1 W.L.R. 237, CA, at [21].
99 [2000] 2 A.C. 326, at 338D; the rejection of the legitimate expectation argument in that case was
endorsed by the House of Lords: see 368DE.
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relation to more recent treaties (and it would be very difficult to identify

any clear and workable dividing line between different treaties in this
regard).
Secondly, if ratification of an international treaty were to give rise
to a legitimate expectation that the treaty would be applied in the
United Kingdom, the executive would have effectively amended the law
of this country, contrary to constitutional principle. When a legitimate
expectation is created, decision-makers discretion under domestic law is
curtailed and they come under an obligation to honour it unless there is
some compelling consideration of the public interest which overrides it.
Accordingly, in Thomas v Baptiste,100 a claim to a legitimate expectation
of substantive protection founded on an unincorporated treaty was held
by the Privy Council to face an insurmountable obstacle, namely that
it would be tantamount to the indirect enforcement in domestic law
of an unincorporated treaty. For this reason, such a claim has been
described by Laws L.J. in the Court of Appeal in Roma Rights as a
constitutional solecism.101 Moreover, such a claim is contrary to the
decisions of the House of Lords in Brind, Launder and Hurst, for if there
is a legitimate expectation that the decision-maker will act in accordance
with the unincorporated treaty, that treaty will have become a mandatory
consideration for the decision-maker.102
These points are not confined to claims for substantive legitimate
expectations. A procedural legitimate expectation also creates binding
obligations for the decision-maker in question, and on orthodox analysis in England the making of an unincorporated treaty should not change
domestic law in any way. In Teoh, the High Court held that only a procedural legitimate expectation was created, but this was sufficient to cause
an unincorporated treaty to have a legal impact under domestic law.103
Thirdly, in terms of settled principles of English public law, it is not
feasible to translate the obligation undertaken by the United Kingdom
on the plane of international law into an obligation in domestic law
imposed by way of legitimate expectation in relation to the conduct
of a particular decision-maker. Statements or promises made by one
100 [2000] 2 A.C. 1 at 25; also see 20E and 23AC; and see Lewis v Attorney-General of Jamaica [2001]
2 A.C. 50, PC, at 8384; Briggs v Baptiste, fn.34 above, at 54AC. Thomas and Lewis contemplate, but
do not decide, that ratification of a treaty might give rise to some form of procedural expectation as was
found in Teoh.
101 [2003] EWCA Civ 666 at [99], and see [100][101]. Laws L.J. also pointed out that the Court of
Appeal was bound by Chundawadra and Behluli, and that these judgments had not been cited in Ahmed
and Adimi. The legitimate expectation argument was not considered by the House of Lords in Roma
Rights [2004] UKHL 55.
102 See also McHugh and Gummow JJ. in Ex p. Lam (2003) 214 C.L.R. 1.
103 The High Court of Australia has for Australian constitutional reasons declined to recognise the
concept of a substantive legitimate expectation: see Ex p. Lam (2003) 214 C.L.R. 1. This point in itself
should give pause for thought before adoption of the Teoh analysis into English law, where attempts
are made to rely upon treaties as creating enforceable substantive legitimate expectationsan effect in
English law which goes far beyond the effect on Australian domestic law contemplated in Teoh itself.
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public body cannot create any binding legitimate expectation in relation

to another decision-making public authority, unless made with the latters
actual or (possibly) ostensible authority. In R. (on the application of Bloggs
61) v Secretary of State for the Home Department the Court of Appeal
held that a legitimate expectation can only be created on the basis of
statements, promises or practices of the relevant decision-maker itself.104
But the Crown does not enter into treaties on the basis of any actual or
ostensible authority provided by other decision-makers, in their capacity
as such. Therefore, any expectations that ratification might create cannot
bind Ministers exercising statutory powers vested in them nor other public
bodies (such as a local authorities, immigration officers, etc.) discharging
their own statutory functions, as enforceable legitimate expectations. This
analysis marries up with other established principles in English public
law. The basic reason why discretions are conferred by Parliament upon
decision-makers is to ensure that there should be flexibility in the decisionmaking system,105 whereby decision-makers can adjust their responses to
take account of unforeseen circumstances or to allow scope for different
evaluations to be made of how to act.106 Statutory discretionary powers
are conferred upon a particular decision-making body because Parliament
intends that body to exercise its own judgment in the light of the particular
circumstances of a case. Parliament leaves it as a matter of discretion and
does not prescribe the outcome, because it has not felt able or thought
it desirable to determine in advance how the decision-maker should act.
Discretionary decision-makers designated by statute cannot lawfully act
at the dictation of another, and must exercise their own judgment how the
discretion should be used, without fettering it or delegating the decision
to another. Thus in Lavender (H) & Son Ltd v Minister for Housing and
Local Government,107 it was held that the Minister of Agriculture could
not discharge the statutory functions of another Minister, the Minister
of Housing, who was obliged to give his own genuine and unfettered
consideration to the question before him. Ministers cannot delegate a
decision which is properly their own to another Minister, nor can they
act at the dictation of another Minister.108 Even if the Crown has entered
104 [2003] EWCA Civ 686; [2003] 1 W.L.R. 2724 at [38][41]; see also, e.g. R. v Education Secretary
Ex p. Begbie [2000] 1 W.L.R. 1115, CA, at 1125GH; R (Reprotech (Pebsham) Ltd) v East Sussex
County Council [2002] UKHL 8; [2003] 1 W.L.R. 348, HL; Kebilene [2000] 2 A.C. 326 at 339DF
(Lord Bingham C.J.).
105 P. Sales and K. Steyn, Legitimate Expectations [2004] P.L. 564 at 567570.
106 The same point is equally applicable where it is the residual, flexible governmental decision-making
power represented by the Crowns powers under common law and Crown prerogative which is in issue.
107 [1970] 1 W.L.R. 1231.
108 See also Launder [1997] 1 W.L.R. 839, where one basis of challenge to the Secretary of States
decision to allow the extradition of the applicant was that the Secretary of State had had undue regard to
the views of the Cabinet rather than forming his own judgment. This argument was unsuccessful on the
facts, but the House of Lords did not doubt that it would have been a good ground of challenge if true:
see 858BC, 867DG.
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into a treaty obligation on the advice of the Cabinet, it is incompatible with

the obligations of Ministers with respect to discretionary decision-making
powers conferred on them by statute for them to treat themselves as bound
(either absolutely or presumptively) by that treaty. English law does not
employ a concept of the State or the Government as a legal person: public
decision-makers are identified persons or bodies, each with their own
distinct responsibilities.109 The difficulties associated with transplanting
Teoh into English law become yet more pronounced when one considers
a claim that Ministers should be bound by the ratification of a treaty
entered into during the time when a different government held office, or
by the current government prior to them becoming Ministers.110
Thus far, we have focused upon discretionary powers conferred by
statute. Should the position be analysed differently where the decisionmaker is acting pursuant to the Crowns common law and prerogative
powers, rather than exercising a statutory discretionary power? Might it
be said that when the Crown enters into a treaty, it creates a legitimate
expectation as to how it itself might behave when the common law and
prerogative powers of the Crown fall to be exercised subsequently?111 In
Ahmed and Patel,112 leave was given by the Court of Appeal to allow
consideration of this issue. It was in this context that the court was
prepared to accept, obiter, that the Teoh analysis might be applied in
English law so that the ratification of a treaty could give rise to a legitimate
expectation affecting the exercise of the Crowns powers. However, the
answer to these questions ought to depend upon whether the reasoning in
relation to the Crowns prerogative powers can be distinguished from the
arguments identified above in relation to the exercise of statutory powers.
We suggest that there is no proper point of distinction, and that the Teoh
analysis should be rejected in this context just as it should be in relation to
statutory powers. For the Crowns prerogative powers, it is the common
law rather than statute which defines the extent of the discretion available
to the decision-maker, but it remains the case that for the decision-maker
to be bound by a treaty on the basis of legitimate expectation would
be to endorse the view that the making of the treaty has changed legal
rights and obligations in domestic law, contrary to orthodox constitutional
principle. Furthermore, the conceptual step made in English law to bring
109 There is a revealing divide between the majority in Teoh and McHugh J., who dissented. The
majority judgments proceed on the basis of an assumption that the Australian government was somehow
to be treated as a single entity operating through a number of agents (see 291 per Mason C.J. and Deane J.;
298299 and 301 per Toohey J.); whereas McHugh J. emphasised the distinct nature and responsibilities
of different decision-makers within the executive branch (see 316318). It is the view of McHugh J.
which corresponds most closely with basic doctrine in English law.
110 Cf Kebilene [2000] 2 A.C. 326.
111 See H.W.R Wade and C.R. Forsyth, Administrative Law, 9th edn, pp.4547: in practice, the exercise
of the Crowns common law and prerogative powers are controlled by ministers, since convention requires
that the Crown should act as its ministers advise.
112 [1998] I.N.L.R. 570; see 572ef.
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the Crowns prerogative powers increasingly under effective review by

the courts involves focusing on the actions of the Minister responsible for
the exercise of the prerogative power rather than on the actions of the
Crown itself113 i.e. emphasising the distinction between the effective
decision-maker (the Minister charged with responsibility for that aspect
of exercise of the Crowns powers) and the purely formal decision-maker
(the monarch). By this means, the position of Ministers in relation to
the exercise of the Crowns powers is equiparated with their position in
relation to the exercise of statutory powers. But this same conceptual logic
suggests that the reasoning in Teoh should not be applied in relation to
the exercise by Ministers of the Crowns prerogative powers any more
than it is applicable in relation to the exercise of statutory powers by
Ministers. At a time when the trend in judicial review is not to draw
sharp distinctions between these two types of case, the rejection of Teoh
would also have the benefit of avoiding an awkward distinction between
them being reintroduced into the law.
CUSTOMARY INTERNATIONAL LAW
In recent years, parties to domestic court proceedings have sought to place
increasing reliance on rules of CIL. We now turn to examine the difficult
question of the extent to which CIL forms part of domestic law.
There was a simple traditional view114 that CIL is automatically
incorporated into the common law of England. However, as Lord Bingham
has recently observed in R. v Jones (Margaret),115 this simple view
requires significant qualification. CIL is a source for the development of
domestic common law, rather than being directly incorporated into it.116
The better viewand the view that accords with constitutional principle
113 See e.g. Council of Civil Service Unions [1985] A.C. 374; R v Secretary of State for the Home
Department Ex p. Bentley [1994] Q.B. 349; R v Criminal Injuries Compensation Board Ex p. P [1995]
1 W.L.R. 845, CA; R v Ministry of Defence Ex p. Walker [2000] 1 W.L.R. 806, HL; R (Association of
British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473;
[2003] Q.B. 1397; Bancoult (No.2) [2007] EWCA Civ 498 at [31][36], [87] et seq., [114] et seq. This
pattern, treating Ministers as decision-makers distinct from the Crown itself and amenable to review in
their capacity as Ministers, is the same as that adopted historically so as to make Ministers liable for
torts committed in their capacity as Ministers: see M v Home Office [1994] 1 A.C. 377; Wade (1991) 107
L.Q.R. 4.
114 See, e.g. Triquet v Bath (1764) 3 Burr. 1478 at 1481; Blackstones Commentaries, Bk IV, Ch.5,
p.67; Duke of Brunswick v King of Hanover (1844) 6 Beav. 1 at 5152; Emperor of Austria v Day (1861)
2 Giff. 628 at 678; and, more recently, JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry
[1989] Ch. 72 at 207. This simple approach was adapted by the Court of Appeal in Trendtex Trading
Corp v Central Bank of Nigeria [1977] Q.B. 529 into a rather more complex version.
115 [2006] UKHL 16; [2007] 1 A.C. 136 at [11].
116 Picciotto, The Relation of International Law to the Law of England and of the United States of
America: a Study ( 1915), at pp.105106; Brierly, International Law in England (1935) 51 L.Q.R. 24
at 31; Collier, Is International Law Really Part of the Law of England? (1989) 38 I.C.L.Q. 924 at 935.
There seems to be truth in Brierlys contention . . . that [customary] international law is not a part, but
is one of the sources of, English law: Jones (Margaret) [2006] UKHL 16; [2007] 1 A.C. 136 at [11]
(Lord Bingham).
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in modern conditionsis that domestic constitutional law operates as a

filter governing the extent to which the domestic courts should recognise
norms taken from CIL and treat them as forming part of the common
law and hence as directly enforceable in domestic law. The importance
of recognising this filter is emphasised by consideration of the nature of
CIL in its modern form and of the pace at which and processes by which
it may change:
the new CIL differs from traditional CIL in several fundamental
ways. It is less tied to state practice, it can develop rapidly, and
it increasingly purports to regulate a states treatment of its own
citizens.117
One may compare the position in Ireland, with its written constitution,
where it is explicitly recognised that the reception of CIL into domestic
law only operates to the extent that CIL is consistent with the constitution.118 Yet the United Kingdom, with a largely unwritten constitution,
equally has constitutional rules governing such matters (even if they may
be less precise and harder to identify), and the basic approach to the reception of CIL norms into domestic law should be mediated in a similar way.
As Lord Bingham observed in R. v Jones (Margaret):
It is, I think, true that customary international law is applicable in
the English courts only where the constitution permits.119
We suggest that the true legal position in English law has also been
obscured by the antiquity of the authorities usually relied upon to support
the proposition that CIL forms part of the common law120 (combined with
a dearth in many later cases of detailed argument to the contrary, even
though the nature of CIL has changed in modern times and comes more
directly into conflict with democratic principle in its modern form). The
position set out by Blackstone in his Commentaries related to CIL which
was established and long standing even at the time he wrote, concerning
piracy, protection of diplomats and sovereign immunity. The international
rules governing these areas could be regarded as part of the natural legal
117 Bradley and Goldsmith, Customary International Law as Federal Common Law: a Critique of the
Modern Position (1997) 110 Harvard Law Review 815 at 842.
118 See Horgan v An Taoiseach, the Minister for Foreign Affairs [2003] 2 I.R. 468 at 505508. The
position in the US is complex, but Bradley and Goldsmith similarly argue in light of the US constitutional
position that CIL should not automatically be treated as US federal law: (1997) 110 Harvard Law Review
815 at 857.
119 [2006] UKHL 16; [2007] 1 A.C. 136 at [23], citing OKeefe, Customary International Crimes in
English Courts (2001) B.Y.I.L. 293 at 335.
120 Buvot v Barbut (1736) 3 Burr. 1481, 4 Burr. 2016; Triquet v Bath (1764) 3 Burr. 1478 at 1481;
Blackstones Commentaries, Bk. IV, Ch.5, p.67; Duke of Brunswick v King of Hanover (1844) 6 Beav. 1
at 5152.
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order.121 Blackstone was not confronted with a legal world in which these
rules were being changed or added to by processes external to the lawmaking arrangements set out in the constitution of the state. Further, he
was writing at a time before the full development of democratic legal
theory in the 19th and 20th centuries, and before the full development of
credible democratic credentials of Parliament with the expansion of the
franchise over that period. These twin developments call into question
whether Blackstones position can continue to be accepted in modern
times.122
Not only does recognition of the dynamic and changing nature of CIL
in modern times in itself call into question whether it can be treated
automatically as part of domestic law123 ; the tension with domestic
constitutional law is heightened by consideration of the processes by
which CIL may come to be established. Two points should be emphasised
here. First, it is possible that a state may become bound by a rule of
CIL without having assented to it in any way, since under the modern
statement of the relevant principle all that is required in practice is that a
large majority of states accept the binding force of the rule in question124 ;
and, more generally, the legitimacy of the law-making process in relation
to the formation of CIL is itself open to question.125 Secondly, a rule
of CIL is identified by reference to the practice of states, which may
consist in the actions of the executive arm of a state without reference to
legislative involvement.126 But where, in the case of the United Kingdom,
the practice relied upon in support of a relevant rule of CIL is that of the
executive (as in many cases it will be), the same constitutional objection
applies as applies in relation to the applicability of unincorporated treaties
into domestic law: the Crown has no power to change English law. Since
the Crown cannot change domestic law by means of entering into an
international treaty with other states, still less should it be capable of
doing so by the mere adoption of practices which may at some point come
121 See, e.g. Picciotto, The Relation of International Law to the Law of England and of the US ( 1915),
at pp.7576, 9394, 107108.
122 Compare Milsom, The Past and the Future of Judge-Made Law (198182) 8 Monash University
Law Review 1, esp. at 1213.
123 See also Dunworth, Hidden Anxieties: Customary International Law in New Zealand (2004) 2
New Zealand Journal of Public & International Law 67 at 71.
124 See North Sea Continental Shelf Cases (1969) 41 I.L.R. 29, discussed in Mendelson, Formation
of Customary International Law (1999) 272 Hague Recueil 159; Roma Rights [2004] UKHL 55 at [23];
Bradley and Goldsmith, Customary International Law (1997) 110 Harvard Law Review 815 at 838842
and 857.
125 See, e.g. Kelly, The Twilight of Customary International Law (1999) 40 Virginia Journal of
International Law 449; Young, Sorting Out the Debate Over Customary International Law (2001) 42
Virginia Journal of International Law 365 at 372374, 385390; Byers, Custom, Power and the Power
of Rules (1999); Knop, Here and There (1999-2000) 32 New York University Journal of International
Law & Politics 501.
126 From the perspective of international law and practice, a state is a single unified entity, and no
relevant distinction is to be drawn between the constituent parts of its government or constitution.
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to coincide with those of other states.127 Also, the process of formation

of a rule of CIL will typically be gradual, uncertain and without the
transparency and determinacy associated with the negotiation of a treaty,
and hence even less amenable to being influenced by domestic political
processesso one might expect the argument against automatic reception
of such a rule into domestic law to be especially strong.128
A further reason why it is not persuasive, from the point of view
of domestic law, to distinguish CIL from treaties, arises from the
relationship between the two under international law. Treaty provisions
override CIL.129 A theory of direct incorporation of CIL into domestic
law would therefore either involve acceptingcontrary to constitutional
principlethat the Crown can change domestic law by making a treaty,
or that a rule of CIL which has become domestic law cannot be affected
at the level of domestic law by the making of a treaty, albeit that that rule
would no longer apply on the plane of international lawwhich might be
thought to be the worst of all worlds.
The House of Lords in R. v Jones (Margaret)130 makes it clear that one
rule of constitutional law (that a new criminal offence can only be created
by Parliament) operates as a filter to prevent reception into domestic law
of offences specified under CIL.131 But this was taken to be but one
illustration of a wider principle, namely that the reception of CIL into
domestic law is always subject to that process being compatible with
domestic constitutional law.132 There are other examples at the highest
level of adoption of such an approach. In International Tin Council,
the House of Lords rejected the argument that an alleged rule of CIL
regarding the liability of states parties to a treaty creating a commercial
organisation for its debts should be given effect in English law on the
basis of the incorporation doctrine, since to do so would undermine the
127 Also, in some cases, the practice relevant to the creation of a CIL norm may itself simply be the
making of a treaty by the executive: see the discussion in North Sea Continental Shelf Cases (1969) 41
I.L.R. 29. The existence of this class of case underlines the difficulty involved in differentiating sharply
between reception of unincorporated treaties and reception of CIL into domestic law.
128 Bradley and Goldsmith, Customary International Law (1997) 110 Harvard Law Review 815 at
858859; see also Dunworth, Hidden Anxieties: Customary International Law in New Zealand (2004)
2 New Zealand Journal of Public & International Law 67 at 68.
129 See, e.g. Oppenheims International Law, Volume 1: Peace, 9th edn (1992), at p.1249; Koskenniemi
(April 13, 2006; A/CN.4/L.682), paras 7881. This does not apply where the rule of CIL is in the highly
exceptional category of ius cogens.
130 [2006] UKHL 16; [2007] 1 A.C. 136.
131 Jones (Margaret) [2006] UKHL 16 at [23], [30] (Lord Bingham), [60] (Lord Hoffmann), [102]
(Lord Mance).
132 See in particular at [11], [23] (Lord Bingham) and [65][66] (Lord Hoffmann). See also statements
in some of the older authorities: R. v Keyn (1876) 2 Ex. D. 63 at 202203 (Cockburn C.J.); West Rand
Central Gold Mining Corp [1905] 2 K.B. 391 at 408 (Lord Alverstone C.J.); Chung Chi Cheung v The
King [1939] A.C. 160 at 167168 (Lord Atkin); also R. v Secretary of State for the Home Department Ex
p. Thakrar [1974] Q.B. 684 at 701702 (Lord Denning M.R.).
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rule of constitutional law that unincorporated treaties do not create rights

or obligations in domestic law.133
The decision of the US Supreme Court in Sosa v Alvarez-Machin 134
provides an interesting parallel, calling into question the extent to which
US courts should enforce norms of CIL under the Alien Tort Statute of
1789. The court held that, notwithstanding the effect of that statute to
allow US domestic courts to recognise private causes of action for torts
in violation of the law of nations, the torts so recognised should be limited
to violations of
a norm of international character accepted by the civilized world
and defined with a specificity comparable to the features of the 18th
century paradigms [sc. safe conducts, infringements of the rights of
ambassadors and piracy].135
The courts reasons for this conclusion emphasised the domestic constitutional reasons for limiting law-making by the courts and external forces,
and for the courts to avoid taking decisions with potential implications
for the foreign relations of the United States (an area assigned by the
Constitution to the executive and legislative branches).136
The task now facing courts in the United Kingdom is to articulate a set
of criteria by reference to which relevant rules of CIL can be identified as
properly applicable by those courts.137 What is called for is a principled
debate about what the relationship should be between CIL and domestic
law,138 and the expression that relationship should be given in the form
of a detailed rule.
In Trendtex,139 Lord Denning recognised the dynamic nature of CIL,
and reacted to that in the particular context he was dealing with by
133 See [1990] 2 A.C. 418 at 498CD, 498G499B and 512DG (Lord Oliver); also 480BE (Lord
Templeman). Also see Lyons [2002] UKHL 44 at [39][40] (Lord Hoffmann).
134 542 U.S. 692 (2004).
135 542 U.S. 692 (2004) at 724725.
136 542 U.S. 692 (2004) at 725728. Scalia J., joined by Rehnquist C.J. and Thomas J., delivered a
concurring opinion, but emphasising still more strongly the domestic constitutional reasons for rejecting
the reception into domestic law of any development of CIL after the framing of the Constitution in the
18th century: see esp. 750751.
137 It was just such an issue which divided the minority led by Scalia J. and the majority in Sosa v
Alvarez-Machin. It should be noted that both sides of that debate adopted narrow and stringent tests of
what would be acceptable: according to Scalia J., it should only be those rules of CIL recognised by
Blackstone and those who framed the Constitution; according to the majority, additional rules could be
accepted, but only if they were similar in character to the rules recognised by Blackstone. We would
suggest that it is neither helpful nor accurate simply to say that the reception of CIL by the courts
represents the exercise of a discretionary law-making power vested in them (cf. Capps, The Court as
Gatekeeper: Customary International Law in English Courts (2007) 70 M.L.R. 458 at 664): the courts
own decision-making power is itself circumscribed by rules of constitutional law.
138 See also Dunworth, Hidden Anxieties: Customary International Law in New Zealand (2004) 2
New Zealand Journal of Public & International Law 67.
139 [1977] Q.B. 529. For discussion of Trendtex and cases after it, see Cunningham, The European
Convention on Human Rights, Customary International Law and the Constitution (1994) 43 I.C.L.Q.
537.
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articulation of a common law rule adopting into domestic law a relevant

rule of CIL, whatever that CIL rule might be at any given point in time.140
This interpretation of the law was preferred to adoption of an approach
that changes in a rule of CIL should be recognised in the domestic courts
only if incorporated into domestic law by legislation.141 But he did not
consider an approach lying between these two extremes, whereby CIL
might be applied by the domestic courts, but only to the extent that it
does not conflict with principles of our domestic constitutional law. It
is the possibility of development of such an approach that is opened
up by reflection on the underlying rationale for constitutional rules in
place to protect the democratic principle within the United Kingdom, the
approach adopted by the House of Lords in R. v Jones (Margaret) and
comparison with the approach to reception of CIL in other jurisdictions
in the common law tradition, particularly Ireland and the United States.
If such an approach is to be adopted, how should the filter rule be stated?
Writing about the reception of CIL into the law of New Zealand,142
Treasa Dunworth notes a number of principled concerns in that regard,143
and suggests that a possible way to achieve a balance between the
internationalist impulse and self-governance would be to adopt a rule
whereby some CIL may be received into domestic law, but some CIL
rules, perceived to be less legitimate, are excluded. So far as English
law is concerned, we submit that the relevant filter should be developed
more by reference to domestic constitutional principles about the proper
locus of law-making and decision-making power in our parliamentary
democracy than by reference to an approach which would require the
domestic courts to attempt to judge the legitimacy or pedigree of rules
of CIL. The first set of issues are already the appropriate subject area
for decision by domestic courts (and are readily amenable to domestic
judicial expertise and reasoning); they are not well-placed to make the
sort of over-arching judgments about CIL suggested under the alternative
approach.
There is a choice to be made about how hospitable English law should
be in relation to the reception of CIL norms into domestic law. One
approach might be to say that the default position is that such norms are
to be treated as capable of being applied, subject only to it being shown
140 This solution to the problem of the dynamic nature of CIL suggests that to say that CIL is
incorporated into the common law is slightly misleading; it would be more accurate to speak of
the common law defining the conditions under which a rule of CIL may be pleaded in (received by)
domestic courts and enforced by them in the same way as the rules of common law.
141 [1977] Q.B. 529 at 553554. If the prior rule of CIL had actually become part of the common law,
the logic whereby legislation was required to change it to bring it into line with the new (changed) rule
of CIL would have been strong.
142 Dunworth, Hidden Anxieties (2004) 2 New Zealand Journal of Public & International Law 67.
143 The tension with self-government and parliamentary sovereignty, the instability and expanding
boundaries of CIL, the undemocratic methods by which it is created.
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that some specific principle of constitutional law (such as that identified

in R. v Jones (Margaret)) clearly overrides that process. But we would
suggest that the basic constitutional arguments set out above against direct
reception of, in particular, the new kind of expansive and dynamic CIL are
of such weight that such a comparatively open approach to the reception
of CIL should not be adopted.
Rather, the presumption should be against direct reception of CIL
into domestic law, unless a more specific set of positive criteria calling
for its adoption can be satisfied. This suggestion is in line with the
approach of the majority of the US Supreme Court when faced with the
analogous issue in Sosa v Alvarez-Machin, where they were unwilling to
exclude the possibility of direct enforcement of norms of CIL not known
to the Framers of the Constitution, but considered that (for domestic
constitutional reasons, including the importance of self-government)
enforcement should be confined to a very narrow class of such norms.
In the English context, the particular criteria chosen by the Supreme
Court are not directly appropriate. However, at this early point in the
development of the law in this field, we suggest that an appropriate set
of criteria for reception of a CIL rule into English domestic law might
be along the following lines: (1) the area in which the rule applies is one
which plainly calls for co-ordination and reciprocity between states and an
international approach, such that it is already accepted144 or is otherwise
appropriate that the common law should look outwards to the wider world
to identify appropriate norms to govern the facts arising before the court
(the traditional areas of incorporation identified by Blackstone arose in this
sort of context, as did the rules of sovereign immunity in Trendtex ); (2)
it is possible to identify clearly within the domestic arena which public
authority should have legal responsibility for giving effect to the CIL
rule145 ; (3) the area in which the rule applies is one in which Parliament
has abstained from legislative control and is not one in which statutory
intervention to create or modify rights or obligations is normally to be
expectedthus allowing the inference that the courts have been left with
a particularly wide margin of judgment for themselves how to develop
the law in the cases before them; (4) the area is one which international
law has for an extended period treated as governed by general customary
norms, even if (as in Trendtex ) those norms have been subject to change
(so that it may be said that Parliament has been sufficiently on notice of
the general, customary nature of the regulation of the area in question, and
144 Sovereign immunity, for example, only becomes a matter which the courts have to deal with because
there are international norms on the subject which the courts have traditionally accepted as applicable.
145 Otherwise, the courts are required to adopt the role of legislator in creating legal obligations within
the domestic legal order. Many rules of CIL simply impose obligations upon the state, without specifying
who within the state has domestic responsibility for complying with them: cf. Lyons [2002] UKHL 44
at [40]; McKerr [2004] UKHL 12 at [63].
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has hadand implicitly declineda full opportunity to intervene itself;

and to minimise the problems which would arise in domestic constitutional
terms from modification of CIL by treaties); and (5) enforcement of the
rule would not infringe any important principle of domestic constitutional
law, nor offend against any important public interest requiring protection
by the courts.
The first four criteria are proposed in order to demarcate the parameters within which recognition and enforcement of rules not having a
parliamentary source may be regarded as acceptable in our parliamentary
democracy. The fifth is proposed to ensure that the domestic constitutional
distribution of power, authority and responsibility is respected. Thus, for
example, there is now a CIL rule that force may not be used between
states unless in self-defence or under the authority of a resolution of the
UN Security Council. But in English domestic terms the disposition of
the armed forces and decisions as to their use are matters for the decision
of the executive government (subject to political control through Parliament), and in view of the subject-matter are not amenable to control by
the courts.146 If all norms of CIL were directly incorporated into domestic
law, there would be scope for applications to be made to the courts for
mandatory orders to prevent military action in breach of this norm. But
there is no sign that the courts would entertain a challenge to such a decision in an area central to the executives own responsibility for national
security. The conduct of foreign affairs is similarly regarded as a classic area for judicial non-intervention.147 R. v Jones (Margaret) provides
another example of this limitation in operation. Similarly, the constitutional rule requiring parliamentary control of public expenditure148 may
represent another example, limiting the direct reception into domestic law
of customary norms with significant implications for public expenditure.
An example of the public interest limiting reception of CIL in a given
case would include avoidance of interfering with the effective conduct of
international relations.149
CONCLUSION
Since the Second World War, the pace of change in the development of
international law has increased, both by way of the making of treaties and
through evolving and expanding norms of customary law. Through the
146 See, e.g. Council of Civil Service Unions [1985] A.C. 374; Campaign for Nuclear Disarmament
[2002] EWHC 2759 at [15], [47(iii)], [50] and [59(ii)]; Marchiori [2002] EWCA Civ 3 at [38][41];
Chandler v DPP [1964] A.C. 763; Jones (Margaret) [2006] UKHL 16; Gentle [2006] EWCA Civ 1689
at [26] et seq.; Bancoult (No.2) [2007] EWCA Civ 498 at [102], [117][118].
147 See, e.g. Abbasi [2002] EWCA Civ 1598 at [106]; Al Rawi [2006] EWCA Civ 1279.
148 See, e.g. Steele Ford & Newton v Crown Prosecution Service (No.2) [1994] 1 A.C. 22.
149 cf. Campaign for Nuclear Disarmament [2002] EWHC 2759 at [38][40], [47(ii)]; Sosa v AlvarezMachin 542 U.S. 692 (2004) at 727728, 747.
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proliferation of international rules, and the expansion of their coverage

of subject-matter, the scope for dissonance between English domestic
law and international law has increased. This has led to a degree of
pressure for the domestic courts to afford greater recognition in domestic
law to unincorporated treaties, and to new life being breathed into very
old doctrines about the incorporation of CIL into domestic law, but by
reference to new, and different, types of CIL. It is important that these
pressures be examined in the light of domestic constitutional principles
and constrained within acceptable bounds by being filtered through
domestic constitutional law. Constitutional considerations continue to lead
to the conclusion that reception in domestic law of norms of international
law in unincorporated treaties and CIL should be limited. The risk of
some degree of dissonance between domestic law and international law is
the natural consequence of self-government by states and of parliamentary
sovereignty as the primary constitutional principle of government within
the state,150 and its elimination is a matter for the political process. It is
not the proper function of the domestic courts to change domestic legal
principles to eliminate such dissonance.
PHILIP SALES.*
JOANNE CLEMENT.**
150 These factors may be regarded as one of the reasons underlying the more general phenomenon,
noted by Hobsbawm, Globalisation, Democracy and Terrorism (2007), at p.38, that the state and politics
represent the predominant area which has remained resistant to forces of globalisation and global
standardisation.
* Q.C., First Treasury Counsel, Common Law.
** Barrister. We are grateful to Christopher Greenwood, C.M.G., Q.C., who commented on a draft of
this article. Any errors which remain are, of course, our responsibility.
Common law; Customary law; Discretion; Legitimate expectation; Parliamentary sovereignty;
Separation of powers; Statutory interpretation; Treaties
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FAMILY PROPERTY TODAY

THE House of Lords and Privy Council have recently revisited the common
law rules regarding family property, principally the common intention
constructive trust. This article offers a critical assessment of where we
now stand.
THE CONTEXT
The broad context is that in which a person claims a beneficial interest in
a house under an implied trust. Of course there are various ways in which
this might be done. We are concerned with that addressed by the line of
authority which includes the House of Lords earlier decisions in Pettitt v
Pettitt,1 Gissing v Gissing 2 and Lloyds Bank Plc v Rosset,3 together with
the more recent decisions of the House of Lords in Stack v Dowden 4
and of the Privy Council in Abbott v Abbott.5 These decisions apply most
familiarly to the case, which we will call the single name scenario,
where legal title6 to a house is held by D alone; there is no express trust
in favour of C7 ; but C nonetheless claims a beneficial interest: either the
entire beneficial ownership (i.e. D holds the house on trust for C, full stop),
or a share alongside D (i.e. D holds the house on trust for himself8 and
C).9 They also apply to another case, the joint names scenario, where
1 [1970] A.C. 777.

2 [1971] A.C. 886.
3 [1990] A.C. 107.
4 [2007] UKHL 17; [2007] 2 A.C. 432.
5 [2007] UKPC 53.
6 In fact, the position would be the sameor very nearlyif D himself had only an equitable interest
in the house, such as an estate contract: he might hold this in turn on trust for (himself and) C, under the
rules to be discussed. For simplicity, the account in the text will refer solely to the situation where D is
the legal owner.
7 If there is a express trust in favour of C, that is conclusive as to the existence and extent of Cs
beneficial interest: Goodman v Gallant [1986] Fam. 106. Or so it is generally thought. In fact, that
decision may hold only that a different contention cannot be made on the basis of circumstances existing
at the time of the declaration (e.g. on the basis of Cs having contributed more, or less, than half the price
paid when the house was transferred into Ds name). There is every reason why such an argument should
be prevented by the express declaration; but less (though not no) reason why the interests established by
the declaration should not be varied by subsequent events.
8 In this article, the masculine pronoun is used to denote both D and C, but is intended to include
the feminine. In practice, D is usually male, and C usually female, and that can matter; but it is also
important to remain sensitive to the converse possibility, and of course to same-sex scenarios.
9 C might of course be more than one person: as where a house is registered in the sole name of a
father, and his children claim shares in his house under these rules. Despite the single name label, too,
D might also be more than one person: as where a house is registered in the joint names of a husband
and wife, and their child or children claim. The key thing is that D must not include C. If it does,
the case becomes one involving the joint names scenario.
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the title is in the names of D and C; again without an express trust10 ; and
either party claims a beneficial interest, whether to the exclusion of or in
conjunction with the other.11
THE PROBABLE RULES
Prior to the recent decisions in Stack v Dowden 12 and Abbott v Abbott,13
the law was certainly quite complex, but also difficult to state with
confidence. Those decisions have given it a substantial overhaul. It is very
possible to think that they have only left it more complex and uncertain:
some arguments to this effect are identified below. But it is also possible
to think that they leave us with the following, rather simple, set of rules.
(i) In the single name scenario, C prima facie has no interest,
while in the joint names scenario C prima facie has a 50 per
cent interest (equity follows the law).14
(ii) But C can claim more if C and D had a common intention
(or shared intention, or understanding, or agreement) that this
should be the case.15 In the joint names scenario, this common
intention should be found only if the circumstances show C
and D, despite their joint transfer, to have chosen not to share
equally, or to have discarded their initial agreement to do so.
(iii) The question of quantumi.e. the size of the interest that C can
claimis also governed by the parties common intention.16
(iv) The common intention may be express, or implied, or
imputed.17 To find an implied or imputed common intention,
the court will draw upon the parties whole course of
conduct in relation to [the property]18 ; a holistic approach,
undertaking a survey of the whole course of dealing between
the parties and taking account of all conduct which throws light
on what shares were intended.19
10 Or, presumably, a statutory trust (Law of Property Act 1925 ss.34(2) and (3), 36(1)). So if the house
is ostensibly transferred to D and C in certain proportions beneficially, D and C will hold it on trust for
themselves in those proportions.
11 Likewise, again, there may be more than two people involved, as where a house is registered in the
joint names of two generations of family members. The essence of the joint names scenario is that any
claimant is also one of two or more holders of the title.
12 [2007] UKHL 17; [2007] 2 A.C. 432.
13 [2007] UKPC 53.
14 Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [54], [56], [58].
15 Abbott v Abbott [2007] UKPC 53 at [4].
16 [2007] UKPC 53 at [4].
17 [2007] UKPC 53 at [5], citing Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [25]; and at
[6], citing Stack v Dowden at [60].
18 [2007] UKPC 53 at [6], citing Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [60].
19 [2007] UKPC 53 at [6], citing Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [61], in turn
citing Law Commission Discussion Paper, Sharing Homes (Law Com. No.278, 2002), para.4.27.
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It will be noted that this account makes no reference to two rules

which until recently would have required inclusion. These are the direct
financial contributions rule (that is, the rule that a non-express common
intention may be evidenced only by reference to Cs direct contributions
to the purchase price20 ), and the requirement that C should act in
reliance on the common intention, to his detriment.21 The latter attracts no
discussion at all in Stack v Dowden or Abbott v Abbott, but its demise is
understandable: if the common intention can now be imputedi.e. need
not actually existit would be incoherent to expect C to rely on it. The
suppression of the direct financial contributions rule, however, is given
some prominence in Abbott v Abbott.22
The second sentence of proposition (ii) requires explanation. It is based
on the assertion in Stack v Dowden that it will, or should, be very
unusual23 to find a common intention that C in a joint names case
should have a greater than 50 per cent share. This assertion seems to
be not simply an empirical prediction, but intended to have normative
poweri.e. to operate as a signal to judges that they should be unusually
resistant to efforts to prove such a common intention.24 The opinions in
the decision do not clarify just why this should be, but the following may
be the answer. If C and D agree that they should have equal shares in
the property, regardless of the details of who paid how much for what,
etc., their agreement should in principle be respected, as a compromise of
the cross-claims that might otherwise arise. And the taking of a transfer
into joint names, even without an express declaration of trust, can be
seen as indicating that C and D probably did have such an agreement.25
However, this conclusion is not inevitable: it will be negatived if there
was something unusual in the circumstances prevailing at the time of the
transfer, or predictable at that time. And even if we think C and D did
initially have such an agreement, we might find them to have revoked it if
subsequent events so indicate. Whether relied on to show the negativing or
the revocation of an initial agreement, however, the evidence will have to
be more than simply the sort of deviation from detailed all-round equality
that the initial agreement was meant to render irrelevant: something truly
20 Lloyds Bank Plc v Rosset [1991] 1 A.C. 107 at 133.
21 Lloyds Bank Plc v Rosset [1991] 1 A.C. 107 at 132.
22 [2007] UKPC 53 at [5][6], [19].
23 [2007] UKHL 17; [2007] 2 A.C. 432 at [68], [69]; also [14].
24 This is put most clearly by Lord Walker of Gestingthorpe, [2007] UKHL 17; [2007] 2 A.C. 432
at [14]: I am in full agreement with the observation in paragraph 68 of Lady Hales opinion, which I
take to be of central importance to her reasoning and conclusions, that in cases where a house or flat
has been registered in the joint names of a married or cohabiting couple (but with no express declaration
of trust) there will be a considerable burden on whichever of them asserts that their beneficial interests
are uncertain, and do not follow the law. It is also implicit in Lady Hales treatment of the Court of
Appeals approach as flawed because it overlooked this point: at [66].
25 Contrast the single name scenario, where C may not have been party to the decision that the transfer
should be to D alone, so that decision cannot be read as such a compromise agreement.
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indicative that the parties mean to bring their inequalities into play after
all. This was (found to be) the position in Stack v Dowden 26 itself. The
house had been transferred into Cs and Ds joint names (and they had
had a 27-year relationship and four children together), so prima facie
they had agreed to take equal beneficial shares. Their contributions to the
purchase of the house were unequal, but this fact alone did not displace
the prima facie inference. The parties did however also keep their finances
very distinctin particular, D was responsible for the interest payments
on the mortgage, while C made capital repayments, and everything else
was done in separate namesand this indicated an agreement not to share
equally after all.
SOME DIFFICULTIES
At any rate on the surface, the account of the law proposed above is
one that can be easily grasped and applied. There are however difficulties
with it.
Issues of authority
In two ways, the account may be incompatible with rules of legal
authority.27
First, while the account may reflect what was said in Stack v Dowden
and Abbott v Abbott, it may not do proper justice to earlier, but arguably
still extant, House of Lords authority. In allowing common intentions
to be imputed, it is probably at variance with the statement in Gissing v
Gissing 28 that a common intention must be real, and cannot be invented by
the court (though the exact significance of imputed is discussed below).
And, as already noted, in allowing common intentions to be proved
holistically, it is at variance with the direct financial contributions rule,
which was stated in Lloyds Bank Plc v Rosset.29 These variances would
be of no concern if the earlier statements had actually been overruled in
the newer decisions, but this is not the case: the new decisions merely
assert that the law has moved on.30
26 [2007] UKHL 17; [2007] 2 A.C. 432: see at [87][92].
27 See further Swadling, The Common Intention Constructive Trust in the House of Lords: An
Opportunity Missed (2007) 123 L.Q.R. 511; Lee, Stack v Dowden: A Sequel (2008) 124 L.Q.R.
209.
28 [1971] A.C. 886 at 904.
29 [1990] A.C. 107 at 133.
30 Abbott v Abbott [2007] UKPC 53 at [3], [5] (citing Lord Walker in Stack v Dowden [2007] UKHL
17; [2007] 2 A.C. 432 at [26]), [6] (citing Lady Hale in Stack v Dowden at [60]), [19]. The assertions
are in a sense correct: the direct financial contributions rule had been side-stepped in the county court
decision Le Foe v Le Foe [2001] 2 F.L.R. 970, aspersed by the Law Commission (Discussion Paper,
Sharing Homes (Law Com. No.278, 2002), para.4.23), and implicitly shunned by the Court of Appeal in
Oxley v Hiscock [2004] EWCA Civ 546; [2005] Fam. 211 at [40], [68]. But none of these, of course,
could deprive the rule of its technical authority.
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Secondly, while our account closely follows statements made in

especially Abbott v Abbott, which in turn refer to statements made in
Stack v Dowden, it may not be quite reconcilable with a careful reading
of the latter decision. Some of the passages quoted from Stack v Dowden
represented the view of only one judge.31 Others are taken out of their
original context, where they appeared to be directed at issues narrower
than the propositions for which they are now cited.32 Others again are
contradicted by further passages in the same opinion.33 Even Abbott v
Abbott itself is not as clear as it might be. While containing passages
supportive of a holistic approach across the board,34 the advice also
refers to the question whether, in a single name case, C should have a
share in the house, as separate from the question of the size of that
interest.35 This suggests that there is a distinction to be made: that the
two questions are to be treated in different ways. If sobut it is probably
not so, as the difference is never explained, and the result would be
incoherencewe should have to conclude that at least one of the two
questions is not governed by an express, implied or imputed common
intention, established by the holistic approach, after all.36
We may however doubt whether these problems will be allowed to
matter. The desirability of being able to use the simple account stated
above, rather than having to perform feats of legal archaeology, will surely
31 Abbott v Abbott [2007] UKPC 53 at [4], [5] relies on the opinion of Lord Walker in Stack v Dowden
[2007] UKHL 17; [2007] 2 A.C. 432 at [26], [31], when that opinion was concurred in by none of his
brethren.
32 While the majority opinion in Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 certainly
contains support for the holistic approach (at [69][70]), on a close reading this appears to be only as
regards the question whether, in the joint names scenario, C can go past the prima facie implication of
the transfer into joint names, so as to claim a greater than 50% interest. This question is distinguished
from that whether, in the single name scenario, C can claim an interest at all (see at [63], noting that
that question is affected by the old direct financial contributions rule; querying this rule; but passing
on with that does not concern us now). It is also distinguished from the question what size of interest
C can then claim (see at [66]); there is no discussion of how this latter question should be approached.
33 Abbott v Abbott [2007] UKPC 53 at [5], [6] accepts imputed as well as express and implied common
intentions. It does so on the strength of Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [25], [60].
But this reading involves a conflict with statements, in the majority opinion in that decision, requiring
proof of the parties true intentions (at [69]), and asserting that the search is not for the result which
the court itself considers fair (at [61]).
34 [2007] UKPC 53 at [4], [6].
35 [2007] UKPC 53 at [4]. Apparently redundant distinctions are to be found in Stack v Dowden [2007]
UKHL 17; [2007] 2 A.C. 432 too; it is possible to view the difficulties referred to in fn.32 above in this
way.
36 This was certainly the position immediately before Stack v Dowden [2007] UKHL 17; [2007] 2 A.C.
432. The question whether C had an interest at all depended (in theory) on whether the parties had a
genuine common intention, express or implied, though an implied common intention was provable only
by Cs having made direct financial contributions to the acquisition of the house; and then on whether C
had acted in detrimental reliance on this common intention (Gissing v Gissing [1971] A.C. 886; Lloyds
Bank Plc v Rosset [1991] 1 A.C. 107). The size of Cs interest, however, was governed by a yardstick
of fairness (Oxley v Hiscock [2004] EWCA Civ 546; [2005] Fam. 211). The Law Commission seems
to believe that there are still two such questions, answered by different analyses: Cohabitation: The
Financial Consequences of Relationship Breakdown (Law Com. No.307, 2007), paras A.30A.41. This
reading was however apparently arrived at without the benefit of Abbott v Abbott [2007] UKPC 53, which
summarises Stack v Dowden in a way that assists the simpler reading adopted in this article.
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overwhelm such technical objections.37 We turn now, however, to certain

further problems, which may well start to appear, for they are immanent
in some of our accounts own key concepts.
The meaning of imputed
Stack v Dowden 38 and Abbott v Abbott 39 have declared it possible to
proceed on the basis of an imputed common intention, but there is a
lurking imprecision about this idea.40
The cleanest understanding of it, and of express and implied common
intention, must be as follows. An express common intention is to be
found where C and D have actually discussed and reached agreement on
the matter. An implied common intention is to be found where C and D
have not actually discussed the matter, but have proceeded on the basis
of a shared assumption which the court infers from their behaviour.41
An imputed common intention, by contrast, is one foundthat is,
inventedby the court where C and D neither discussed the matter nor
proceeded on the basis of a shared assumption, but the court deals with
the case as though they had done so.42
It is no surprise that the law should accept implied as well as express
common intentions; in referring to a genuine consensus between the
parties, they are substantively synonymous; absent a formality issue,
there is no reason to differentiate them by reference to the extent to
which this consensus is articulated. According to the apparent argument
in the recent cases,43 implied and imputed common intentions are to be
37 The more recent decisions in Holman v Howes [2007] EWCA Civ 877; [2007] B.P.I.R. 1085; Kali
and Burlay v Chawla [2007] EWHC 2357 (Ch); James v Thomas [2007] EWCA Civ 1212; [2007] 3
F.C.R. 696; Laskar v Laskar [2008] EWCA Civ 347 and Morris v Morris [2008] EWCA Civ 257 all seem
to assume that the holistic approach applies across the board, as suggested here. See further Dixon,
The Never-Ending StoryCo-ownership after Stack v Dowden [2007] Conv. 456 at 458.
38 [2007] UKHL 17; [2007] 2 A.C. 432 at [60]; also [18][25].
39 [2007] UKPC 53 at [5], [6].
40 See further Piska, Intention, Fairness and the Presumption of Resulting Trust after Stack v Dowden
(2008) 71 M.L.R. 120, esp. at 126129.
41 To be exact, finding such an agreement/shared assumption does not necessarily mean that it actually
existed. For the matter is seen through the eyes of a reasonable onlooker: Gissing v Gissing [1971] A.C.
886 at 906. The key point, however, is that an agreement/shared assumption is found only where the
reasonable onlooker would think it genuinely existed.
42 This account echoes the analysis of Lord Neuberger in his dissenting opinion, rejecting imputation, in
Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [124][127]. Note also his Lordships discussion,
at [127], of the question whether the agreement to be imputed is that which would have been made by
reasonable parties, or by the actual parties.
43 See Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [25] (Lord Walker), adopted in Abbott
v Abbott [2007] UKPC 53 at [5]. Lord Walker paves the way for this position by seeking to counter
the general understanding that earlier authority ruled out imputation: see especially [2007] UKHL 17;
[2007] 2 A.C. 432 at [20]. This argument depends, however, on the assumption that when Lord Diplock
in Gissing v Gissing [1971] A.C. 886 at 906910 substituted infer for his earlier (Pettitt v Pettitt [1970]
A.C. 777 at 822825) impute, he meant the same thing. This is surely dubious, not least for reason of
Lord Diplocks own acknowledgement ([1971] A.C. 886 at 904) that his earlier approach put him in a
minority, and that he had now to follow the different majority position, requiring the common intention
to be real, not invented. Cf. Lord Neuberger, dissenting, [2007] UKHL 17; [2007] 2 A.C. 432 at [125].
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bracketed because they are likewise substantively synonymous: they share

the characteristic of being found when there was no evidence of an actual
agreement: so if we accept the one, we are bound also to accept the other.
To make sense of this argument, however, actual agreement must
be read as meaning an articulated understanding. It then emerges that
the argument trades on an ambiguity. The reason for the absence of
actual agreement is in the one case (implication) that an understanding
exists but is not articulated; while in the other (imputation), the reason is
that no understanding exists. The arguments reliance on this ambiguity
means that the law can be taken in two different ways. If we read no
actual agreement as extending only to a genuine understanding that is not
articulated, the rule, even if labelled imputation, remains that common
intentions are to be found only in that circumstance. But if we read
no actual agreement as extending to an absence of understanding, the
imputation rule allows common intentions to be found in that case too,
i.e. invented.
The latter version of the rule, which alone involves a change in the
law,44 is presumably the one intended by the House of Lords and Privy
Council, else why have the discussion at all? But the ambiguity of
the underlying argument could result in different judges taking different approaches. Perhaps, even, the same judge will veer between the one
approach and the other, choosing whichever yields the outcome he or she
favours for extraneous reasons. All of which will not make for consistent
justice.
The content of the imputed common intention
Under Stack v Dowden and Abbott v Abbott, the outcomethe interest,
if any, with which C emergesis determined by the common intention.
If there is a genuine common intention, its content will be whatever the
parties have agreed. But if, in the absence of a genuine common intention,
one is imputed by the court, how is its content determined?
The advice in Abbott v Abbott 45 requires reference to be made to the
parties whole course of conduct in relation to [the property],46 and to
the whole course of dealings between the parties . . . taking account
44 A tendency in this direction was visible in earlier material. Direct financial contributions have been
treated not as evidence from which a common intention may be inferred, or may not, but as automatically
establishing such an intention: as in Midland Bank Plc v Cooke [1995] 4 All E.R. 562. An express common
intention has been discovered though the facts seemed less than probative of it: as in Hammond v Mitchell
[1991] 1 W.L.R. 1127; Stokes v Anderson [1991] 1 F.L.R. 391; Abbey National Bank Plc v Stringer [2006]
EWCA Civ 338; [2006] 2 P. & C.R. DG15. And an express common intention has been discovered also
where the facts seemed actually inconsistent with it: as in Eves v Eves [1975] 1 W.L.R. 1338; Grant v
Edwards [1986] Ch. 638. But this material could not authoritatively displace the extant House of Lords
ruling against the invention of common intention: Gissing v Gissing [1971] A.C. 886 at 904.
45 [2007] UKPC 53 at [6].
46 Drawn from Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [60].
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of all conduct which throws light on the question what shares were
intended.47 If this was the sum total of the courts guidance on the
matter, we should be thoroughly at sea: the import of especially the latter
remark is decidedly in the eye of the beholder. But Lady Hales opinion
in Stack v Dowden 48 (representing the majority view, for Lord Hoffmann,
Lord Hope of Craighead and Lord Walker of Gesthingthorpe concurred in
it) contains a more extensive passage, presumably meant to be congruent
with the headline statements:
Each case will turn on its own facts. Many more factors than
financial contribution may be relevant to divining the parties true
intentions. These include: any advice or discussions at the time
of the transfer which cast light upon [the parties] intentions then;
the reasons why the home was acquired in their joint names; the
reasons why (if it be the case) the survivor was authorized to give a
receipt for the capital monies; the purpose for which the home was
acquired; the nature of the parties relationship; whether they had
children for whom they both had responsibility to provide a home;
how the purchase was financed, both initially and subsequently; how
the parties arranged their finances, whether separately or together or
a bit of both; how they discharged the outgoings on the property
and their other household expenses. When a couple are joint owners
of the home and jointly liable for the mortgage, the inference to
be drawn from who pays for what may be very different from
the inferences to be drawn when only one is the owner of the
home. The arithmetical calculation of how much was paid by each
is also likely to be less important. It will be easier to draw the
inference that they intended that each should contribute as much to
the household as they reasonably could and that they would share the
eventual benefit or burden equally. The parties individual characters
and personalities may also be a factor in deciding where their true
intentions lay. In the cohabitation context, mercenary considerations
may be more to the fore than they would be in marriage, but it
should not be assumed that they always take pride of place over
natural love and affection. . .. This is not . . . an exhaustive list.
There may also be reason to conclude that, whatever the parties
intentions at the outset, these have now changed. An example might
be where one party has financed (or constructed himself) an extension
or substantial improvement to the property, so that what they have
now is significantly different from what they had then.
47 Drawn from Law Commission Discussion Paper, Sharing Homes (Law Com. No.278, 2002),
para.4.27, approved in Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [61].
48 [2007] UKHL 17; [2007] 2 A.C. 432 at [69][70]. Note the references to the parties true intentions,
in apparent contradiction of the rule allowing common intention to be invented: cf. fn.33 above. Or perhaps
true means true in a transcendent sense, even if unsuspected by the parties themselves.
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The significance of this passage is made clearer by comparing it with one

in the opinion of Lord Neuberger49 :
The fact that the parties operated their day-to-day financial affairs
through a joint bank account, into which both their wages were paid
and from which all family outgoings were paid, could fairly be said to
be strong evidence that they intended the sums in that account to be
owned equally. Accordingly, it would normally be easy to justify the
contention that a home acquired with money from that account (often
together with a mortgage in joint names) should be treated as acquired
with jointly owned money and therefore as beneficially owned
jointly. However, I am unhappy with the suggestion that, because
parties share or pool their regular income and outgoings, it can be
assumed that they intended that the beneficial interest in their home,
acquired in joint names but with significantly different contributions,
should be shared equally. There is a substantial difference, in law,
in commercial terms, in practice, and almost always in terms of
value and importance, between the ownership of a home and the
ownership of a bank account or, indeed, furniture, furnishings and
other chattels.
The majority evidently accepts a wider frame of reference than Lord
Neuberger. Lord Neuberger looks only to Cs and Ds behaviour bearing
directly on the acquisition of the house, separating this from the question
of how they organised their lives and affairs more generally. But the
majority demurs, holding that there need be no such separation: that the
parties overall organisation of their lives and affairs probably will indicate
the shape of their common intention regarding the house. This difference
is important. Under Lord Neubergers approach, the law would in effect
respond only to the claims of those who have a relatively high profile in
their familys financial dealings: it is only they who will make the clearly
identifiable contribution to the acquisition of the house that his approach
demands. Those who earn little or nothing, or whose income is spent on
ephemerals while their partners covers the mortgage repayments, would
not qualify. So profiled, the law would offer the least support to those
who, from a wider perspective, most need and deserve it.50 The majority
approach, allowing a common intention to share the house to be read
off from all forms of participation in the familys economy, avoids this
weakness. On the other hand, its lack of sharp focus entails a great deal
of latitude as to the content of the common intention to be imputed.51
49 [2007] UKHL 17; [2007] 2 A.C. 432 at [133]; see further at [143][145]. Lord Neuberger rejects
imputation (see at [125][127]), so he is describing the material from which he thinks a genuine common
intention may be inferred; but there is no reason why this should yield the difference between the passages.
50 Lord Neuberger is aware of this: [2007] UKHL 17; [2007] 2 A.C. 432 at [142].
51 See further Dixon, The Never-Ending Story [2007] Conv. 456.
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An insight into the way in which the courts themselves are using
this tool can be had from looking at the actual facts and outcomes in
Stack v Dowden and Abbott v Abbott. In Abbott v Abbott,52 the parties
emerged with equal shares. The house comprised a plot of land given to
the parties equally (though transferred into Ds name alone), together with
a building upon it, financed by a mortgage loan. The parties undertook
joint liability for the loan. The repayments originated largely in Ds
earnings, which were higher than Cs, but the parties routed their income
and outgoings through a joint bank account. They were also married. In
Stack v Dowden,53 by contrast, although the house had been transferred
into joint names, suggesting equal entitlements, C won a share larger than
Ds,54 reflecting the parties individual financial contributions to acquiring
the house. The parties were not only unmarried (though their relationship
lasted many years, and they had four children together): they also kept
their material affairs very separate, pooling their resources only in respect
of the house purchase.55
The following thesis is suggested as capturing all this.
Essentially, the common intention imputed to parties having a materially
communal relationship will give them equal shares in the house, as
in Abbott v Abbott; while that imputed to parties not having such a
relationship, as in Stack v Dowden, will give them shares proportionate
to their individual contributions to the acquisition of the house, though
indirect contributions will count as much as direct ones.
A materially communal relationship is one in which C and D in
practical terms56 pool all their material resources (including money,
other assets, and labour), rather than keeping separate tallies. The
presence of a joint bank account will strongly, almost conclusively,
suggest a materially communal relationship, but its absence will not
particularly prove the opposite. The parties having, or not having, a
sexual relationship will prove nothing either way; likewise even their
having children together, though in this event it is probably commoner
for their relationship to be materially communal. If they are married or
civil partners, their relationship will necessarily be regarded as materially
52 [2007] UKPC 53 at [12][19].
53 [2007] UKHL 17; [2007] 2 A.C. 432 at [86][92].
54 C won 65%. This was in fact the level at which she herself capped her claim; on the courts reasoning,
she might in principle have claimed more. See [2007] UKHL 17; [2007] 2 A.C. 432 at [86][92].
55 In Oxley v Hiscock [2004] EWCA Civ 546; [2005] Fam. 211 (an earlier Court of Appeal decision
largely aligned with the more recent authorities) the house was acquired using a down payment and a
mortgage loan. The proportion acquired by the loan was divided equally between the parties: while not
married or using a joint bank account, they had lived on the basis of a classic pooling of resources
(see at [19], [74]). But the proportion acquired by the down payment was divided pro rata to the parties
individual contributions to that payment (so that C emerged with 40% overall). Quaere why the down
payment was regarded as outside the classic pooling of resources.
56 That is, regardless of technical title. It is the mismatch between technical title and some other
perspective that gives rise to the issues under discussion.
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communal, regardless of the nature and scale of their contributions to

the family economy: that is the basis on which the law proceeds under
the Matrimonial Causes Act 1973.57 But an unmarried couple could
operate likewise, once again regardless of their contributions to the family
economy; though if D is the sole wage-earner, while C keeps house
and perhaps looks after their children, it is hard to see their relationship
otherwise than as materially communal.58
A non-materially communal relationship is one without this profile. That
is not to say that it may not be close in other respects; the parties may
even pool their material resources in one or more areas, as where a couple
both shop for groceries or maybe even buy a car together; but it lacks the
key characteristic of a practical pooling of their material resources across
the board.59 For present purposes, however, the parties must at least both
contribute to the acquisition of the house (albeit that their contributions
may be indirect, as where C meets the household bills while D pays off the
mortgage): for in the case of a non-materially communal relationship, it
is these contributions that generate the imputed common intention, giving
the parties shares in the house in proportion to them.
More recent decisions appear broadly sympathetic to the thesis outlined,
but they cannot be said to give it unequivocal support. They have tended to
proceed on non-materially communal lines: that is, to have been arrived at
by reference to the parties contributions. Given their facts, this has usually
been unsurprising,60 but occasionally more of a difficulty. In James v
Thomas,61 particularly, the court proceeded by reference to contributions,
despite the parties relationship appearing a materially communal one:
though they had not married, C and D had lived together for 15 years
as man and wife. This case also took an unexpected approach to the
57 Matrimonial Causes Act 1973 s.24: see White v White [2001] 1 A.C. 596; Miller v Miller, McFarlane
v McFarlane [2006] UKHL 24, [2006] 2 A.C. 618. The decision in Midland Bank Plc v Cooke [1995]
4 All E.R. 562 follows this pattern. But Pettitt v Pettitt [1970] A.C. 777, Gissing v Gissing [1971] A.C.
886 and Lloyds Bank Plc v Rosset [1991] 1 A.C. 107 would all be decided differently now, in each case
to give C a 50% interest: a dramatic change of direction.
58 So the decision in Burns v Burns [1984] Ch. 317 would likewise be reversed, again giving C a 50%
interest.
59 The decision in Drake v Whipp [1996] 2 F.C.R. 296 would therefore stand: the parties there kept
their affairs in general separate, while collaborating on the acquisition and improvement of the house,
and emerged with shares reflecting their individual contributions to that collaboration.
60 As in Laskar v Laskar [2008] EWCA Civ 347, where a mother (D) got her daughter (C) to join
her in buying the house, in order to obtain a larger mortgage loan than she could have had on her own.
Their shares corresponded to their respective contributions to the price. (D contributed a right to buy
discount, and appeared alone to have repaid the loan. But the repayments were funded by income gained
by renting the house out, which income was due partly to C.)
61 [2007] EWCA Civ 1212; [2007] 3 F.C.R. 696. In some other cases, the parties had been married, but
for a variety of reasons this, very arguably, did not merit a materially communal approach. In Holman
v Howes [2007] EWCA Civ 877; [2007] B.P.I.R. 1085, the parties were already divorced when they
bought the house, doing so in an (abortive) attempt at reconciliation. In Kali and Burlay v Chawla [2007]
EWHC 2357, the parties were married when they acquired the house, but soon separated and divorced,
only the husband continuing to live there and to meet the outgoings. In Morris v Morris [2008] EWCA
Civ 257, although the parties were married, C was claiming a share not in the family home but in Ds
farming enterprise, in which she was little involved.
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recognition of contributions. D paid his mortgage instalments on the house

from the proceeds of his business as an agricultural contractor. C had given
D significant help in this business, eventually entering into partnership
with him; but she was not seen as having thereby contributed to the
acquisition of the house, only as having helped with their other costs.
In the context, however, and since the demise of the direct financial
contributions rule, this reasoning seems inexplicable.62
Even with this degree of support from the more recent decisions, the
sample of cases on which the thesis draws is very small, and their
judgments certainly do not speak in the thesiss own terms. So the
suggested account remains speculative, and may readily be challenged. It
is even possible that no explication at all is possible, or even permissible,
leaving or requiring judges to attend simply to the headline statements
with which we began this section.63 In this respect too, then, we find that
the rules established by the recent decisions lack the clarity necessary for
doing consistent justice in future cases.
The jurisdictions driver
Finally, a deeper-lying difficulty.64 Even if the thesis just sketched is
an accurate portrayal of the way the courts (should) now operate this
jurisdiction, it is hard to say what is the jurisdictions driver: that is, its
basis of principle, entailing that cases should be decided in the manner
described. Stack v Dowden and Abbott v Abbott tell us nothing explicit
about this (and no more did their predecessors); any answer will have
to be gleaned inferentially, from a scrutiny of the set of rules they have
established. If no satisfactory answer can be found, we have a problem.
It will mean that this jurisdiction lacks a justification; and also that
uncertainties and injustices will occur when cases arise at the boundary
between this jurisdiction and another.
In the next section, we shall explore some of the drivers that might
characterise a jurisdiction addressed at the kind of case under discussion,
and compare them with the jurisdiction as it seems to be. The kind
of case under discussion means a case in which a house is nominally
owned by D (or by D and C together); D is usually in some sort of family
relationship with C; C may believeperhaps with Ds agreementthat
62 Holman v Howes [2007] EWCA Civ 877; [2007] B.P.I.R. 1085 is also difficult as regards the
assessment of contributions. The parties shares were set by reference to their broadly equal initial
contributions to the acquisition of the house. But C alone had used the house, making disproportionate
contributions over time. The court heldsurely incorrectlythat this could not give her a greater interest,
as interests had to be fixed by the parties common intention at the time of acquisition.
63 This is the view taken by Dixon, The Never-Ending Story [2007] Conv. 456 at 460. If it is adopted
by the appellate courts, the effect (and perhaps the intention) will be that first instance decisions will
rarely be appealable, for there will be scant basis on which to say that they have been wrongly arrived at.
64 See further Lee, Stack v Dowden: a Sequel (2008) 124 L.Q.R. 209.
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he has or will acquire a beneficial share (or a greater beneficial share than
he already has) in the house; and C generally suffers some loss, often of a
kind that simultaneously confers a benefit on D (as where C meets some
of Ds mortgage liabilities).
SOME POSSIBLE DRIVERS
Four possible drivers will be considered. First, effectuating the parties
intentions; second, redressing Cs reliance loss; third, redressing Cs unjust
enrichment of D; and fourth, effectuating the implications of the parties
relationship.
Before embarking on this discussion, let us dispose of the suggestion
that might be made, that this jurisdiction has a basis akin to that of
proprietary estoppel.65 This suggestion does not itself name a possible
driver, but refers us to whatever driver(s) may underlie proprietary
estoppel. This would be nonetheless helpful if it were clear what does
drive the latter doctrine: but that is notoriously not the case. It may be
possible tentatively to identify certain themes in the case law, but these
seem not to take us beyond the suggestions considered above regarding the
constructive trust jurisdiction,66 so even then we are no further forward.
The suggestion will not, therefore, be pursued further.
Effectuating intentions
If the owner of property purports intentionally to bestow it on another, the
law should in principle recognise him as having done so. This response
is driven by very familiar libertarian considerations. So in our situation,
if D, being wholly (as in the single name scenario) or partly (as in the
joint names scenario) beneficially entitled to property, voluntarily acts to
confer some or all of his entitlement on Cas where D and C have a
genuine common intention on these linesthe law should give effect to
that act.
This analysis plainly cannot explain the normative force that the
jurisdiction accords to an invented common intention. At first sight,
however, it does seem to explain the force attaching to a genuine common
intention. (From this perspective, the demand for a common intention is
65 The suggestion has been made a number of times, including judicially in Grant v Edwards [1986]
Ch. 638 at 656; Re Basham [1986] 1 W.L.R. 1498 at 1504; Austin v Keele (1987) A.J.L.R. 605 at 609;
Lloyds Bank Plc v Rosset [1991] 1 A.C. 107 at 132133; Yaxley v Gotts [2000] Ch. 162 at 176177.
It has however been controverted by Lord Walker in Stack v Dowden [2007] UKHL 17; [2007] 2 A.C.
432 at [37], on the ground that an estoppel claim is a mere equity, satisfied by the minimum award
necessary to do justice, sometimes only a monetary award, whilst a constructive trust claim is about the
true beneficial ownership. This argument has two difficulties. First, the mere equity point is contrary
to the Land Registration Act 2002 s.116. Secondly, speaking of the minimum necessary to do justice
merely begs the question what that is.
66 See Gardner, An Introduction to Land Law (2007), pp.112122.
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mistaken: we should be concerned only to discover whether D intended

a transfer to C: but we might forgive this, especially as in our context
C is highly likely to be privy to any intention that D might have.) But
a moments reflection shows that even cases involving genuine common
intentions cannot be accounted for in this way.
In our context, seen in this way, Ds act of conferment will constitute
either a declaration of an express trust of land (in the single name
scenario), or a disposition of a subsisting beneficial interest (in the joint
names scenario). The law requires that acts taking these particular forms
must be done in writing.67 Writing is characteristically missing from the
cases in which we are interested. If we take the writing requirement
seriouslyas we mustwe cannot argue that the law should give effect
to Ds act nonetheless, and that doing so is a proper mission for the
jurisdiction under discussion, without more.
Such a lack of writing can be obviated if we are within the territory of
the doctrine equity will not permit a statute to be used as an instrument
of fraud. If Ds purported conferral of an interest on C is circumstanced
in such a way that not to effectuate it would be to countenance a
fraud, a legal response is called for after all. And it has been argued
that this is the thrust of our jurisdiction: that if C is aware of Ds act
(common intention), and relies on it, D will commit a fraud if he does
not hold to it. This way of viewing our jurisdiction was suggested by
Glass J.A. in Allen v Snyder,68 drawing an analogy with Rochefoucauld v
Boustead.69
One can see the point. But this suggestion too does not quite fit
our jurisdiction. Under the suggestion, C needs to rely on the common
intention. This was a requirement of earlier decisions,70 but was omitted
from the account given in Stack v Dowden and Abbott v Abbott. Moreover,
the suggestion is problematic in itself. It is not easy to explain (whether
in our context or that of Rochefoucauld v Boustead ) why Cs awareness
of and reliance on Ds act makes it right to give effect to that act despite
the want of writing. It is certainly possible to see in such facts a reliance
loss on Cs part meriting redress. This redress can be depicted as equitys
counteraction of the fraud represented by the loss, but that label should
not skew our understanding of what is actually involved. As a matter of
principle, the redress should track Cs actual loss, rather than necessarily
extending to the whole interest that D purported to confer.71 We shall
consider a reliance loss perspective in its own terms next.
67 Law of Property Act 1925 s.53(1)(b), (c).
68 [1977] 2 N.S.W.L.R. 685 at 692693.
69 [1897] 1 Ch. 196.
70 Especially Lloyds Bank Plc v Rosset [1991] 1 A.C. 107 at 132.
71 It is arguable that in a case like Rochefoucauld v Boustead [1897] 1 Ch. 196, the reliance loss is
the lost opportunity to establish the intended beneficial interest securely, so that redressing the reliance
loss involves conferring that interest. (See further Gardner, An Introduction to the Law of Trusts, 2nd edn
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Redressing Cs reliance loss

If C suffers a loss for which D is to be held responsible, C will look to D
to redress that loss. Affording such redress is a proper and familiar driver
for a legal claim, and the law does indeed operate a project on these lines,
most especially in the form of tort claims.
One way in which C might suffer such a loss is by acting to his
detriment in reasonable reliance on a belief induced by D. The law should
provide C with redress against D for that loss. This pattern can often be
found in the kind of case with which we are concerned. But there are
some disparities between it and the rules under discussion.
First, our jurisdiction talks not of Cs belief, induced by D, but of Cs
and Ds common intention. Strictly, the two are different (a plausible but
insincere assurance on Ds part should suffice to make him liable for Cs
reliance loss, but would negate a common intention), but this might be
overlooked as a mere infelicity of expression. Then, as we have seen,
Stack v Dowden and Abbott v Abbott (in contrast to their predecessors)
omit any demand that C should act in reliance on the common intention;
but we might think that such reliance can almost be taken as read.
More important, however, C cannot claim to have suffered reliance loss
unless he genuinely held the belief on which he claims to have relied: there
is no room, as there is in our jurisdiction, for an invented intention. We
might, though, continue to consider whether those cases that do involve a
genuine beliefalias common intentioncan be explained in terms of a
project of redressing reliance loss. But we find that even in such cases, this
project does not fully map onto our jurisdiction. The main gap between
them is in respect of outcome. Under our jurisdiction, a genuine common
intention that C should have such-and-such a beneficial interest will result
in his gaining that interest. If the project were to redress Cs reliance loss,
this would be a surprising result.
Say C, reasonably relying on his belief engendered by D that he shall
have a 50 per cent beneficial interest in Ds house, expends 10,000 in
renovating that house or indeed helping to acquire it, but in fact no such
interest is conferred. His reliance loss is 10,000, not a 50 per cent or any
other beneficial interest. It would equally be 10,000 if he had incurred
it in reliance on a disappointed belief that he would have any other size
of beneficial interest in the house, or that he would be reimbursed for his
outlay, or that D would marry him, or whatever. The redress for it should
be, not the award of 50 per cent interest in Ds house, but an in personam
award of 10,000 against D.
(2003), at pp.159160. For an alternative argument, see McFarlane, Constructive Trusts Arising on a
Receipt of Property Sub Conditione (2004) 120 L.Q.R. 667.) The possibility that that may be true also
of our situation is considered below, in the course of discussing whether the family property jurisdiction
should be viewed as aimed at redressing reliance loss.
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It is true to say that, sometimes, Cs reliance loss will itself take the
shape of the promised beneficial interest. This will be the case where
his reliance consists in foregoing the opportunity to acquire the promised
interest in some other way. Say C, once again reasonably relying on
his belief engendered by D that he shall have a 50 per cent beneficial
interest in Ds house, decides to move in with D straight away, when he
could have held out for the promised share in Ds house before doing
soand again, no such interest is in fact conferred. The loss C incurs as
a result of his reliance is now the loss of the beneficial interest he should
otherwise have had, and obliging D to make good this loss will properly
take the form of granting C the promised interest.72 To this extent, then,
our jurisdiction might be reconciled with the notion that its mission (where
genuine common intentions are concerned) is to redress reliance losses.
We should however expect greater care than the cases seem to display
to ensure that C is awarded his expected beneficial interest only where
his loss does indeed take this form: as we have seen, the mere fact that
he was promised such an interest does not by any means automatically
entail this. Where his loss takes another form, such as the 10,000 in our
original example, it would need to be redressed correspondingly.
Redressing Cs unjust enrichment of D
Unjust enrichment is another well established driver for a legal response.
If C enriches D in circumstances rendering it unjust that D should retain
the enrichment, D should be obliged to restore it.
The kind of facts with which we are concerned might well disclose
a case of unjust enrichment. Suppose that C confers a benefit on D:
maybe, by directly or indirectly contributing to the mortgage payments,
or by working for D, or by picking up some of Ds responsibilities. D
is enriched, at Cs expense.73 Suppose too that C confers this benefit
not as a gift or loan to D, nor as a speculation, but on the basis of a
belief either that he has an interest in a house ostensibly owned by D, or
elsereceiving a promise by D to this effectthat he will be given such
an interest. If this belief is falsified (i.e. if C was mistaken in his belief
as to his existing rights, or D does not deliver on his promise to confer
new rights), the basis on which C enriched D disappears, and it is unjust
for D to retain that enrichment: he should restore it to C.
72 At first sight, it is not quite the same if, but for his reliance, C would have got on the property
ladder in a house of his own. Here, although his loss is of a beneficial interest, it is not of an interest
that was otherwise Ds. However, the only way of having D make such a loss good is by granting C an
equivalent interest against D. So in the end it comes to the same thing, or close enough to it.
73 Where C works for D, or picks up some of Ds responsibilities, it cannot automatically be said that
D is enriched; but on the kind of facts with which we are concerned, that will typically be the conclusion.
See Birks, Unjust Enrichment (2003), at pp.4849, 5051.
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Facts of this kind, disclosing a mistake or a failure of consideration,

would occur only if C held such a belief when enriching D. Very possibly,
though, Ds enrichment at Cs expense will be unjust also if C acted with
no particular thoughts at all: as where C takes care of some of his and
Ds expenses, thus indirectly helping D repay the mortgage, and does
so without any clear idea of whether he should be reimbursed, or get
something in return, or whatever: a very common phenomenon among
those in emotional relationships. Absence of thought has not traditionally
been regarded as making an enrichment unjust, but Birks has argued that
the true test is not whether C can point to some recognised unjust factor,
such as mistake or failure of consideration, but whether C enriched D
without basis.74 To enrich another with no particular thoughts at all seems
ipso facto to do so without basis.
Some care may be needed here. Where C and D are strangers, we are
disinclined to perceive a transaction between them as having no basis in
this way, which is perhaps why we have traditionally sought the more
concrete ground of a basis which exists but is in some way wanting,
i.e. an unjust factor. Their being strangers makes us expect C to have
been more alert; we are unsympathetic, both empirically and normatively,
to the assertion that he had no particular thoughts as he enriched D.
But in a context like ours, characterised by an emotional relationship
between C and D, it is different. Here, we find it unsurprising if C lets
his guard down, and so behaves towards D with no particular thoughts;
indeed, especially if his behaviour is generous, we find it commendable
that he does so. Ideally, the legal significance of Cs behaviour will lie
below the surface. This will be the position where D reciprocates, himself
taking no particular position as regards the ownership of the ensuing
enrichment; treating it as, if not necessarily something that he and C are
to share equally (as would be the case if their relationship was materially
communal), at any rate not his to walk away with as his own. But if this
reciprocity breaks down, the question of entitlement does come to the
surface. Then, the appropriateness of Cs having acted with no particular
thoughts in enriching D makes it right to regard this as a legitimate case
of want of basis, i.e. to regard Ds enrichment as unjust.
If this is right, we are quite a long way towards establishing a fit between
a mission of redressing unjust enrichment and our jurisdiction. There is
an initial difficulty: Stack v Dowden and Abbott v Abbott do not require
C to have enriched D: but C will commonly have done so in practice, if
not directly then indirectly. Beyond that, the case where Ds enrichment
is unjust because C acts on the basis of a mistaken belief that he already
has an interest, or of a disappointed understanding that he will gain one,
is quite a good match for our jurisdictions genuine common intention.
74 Birks, Unjust Enrichment (2003), Ch.6.
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(Strictly, to establish unjust enrichment a mistake need not be bilateral;

but in our context, it is in reality likely to have been shared, if not induced
by D.) And the case where Ds enrichment is unjust because C acts with
no particular thoughts at all chimes with our jurisdictions preparedness
to impute a common intention, i.e. to give relief where the parties had not
consciously addressed the question of their entitlements.
The fit is patchier, however, when we consider relief. A claim based
on unjust enrichment would aim to restore to C the amount by which he
enriched D. For example, if C unjustly enriches D by contributing a third
of what it costs D to acquire his house, C should get a third of the houses
value. According to the argument made above, this should indeed be the
outcome under our jurisdiction where the required common intention is
imputed rather than genuine, and the parties relationship is not materially
communal: as we have seen, the common intentionand thus the relief
it indicatesis then shaped by the parties relative contributions.75 But it
should be otherwise in the case of an imputed common intention between
parties whose relationship is materially communal, where the outcome will
be equal shares.76 It should also be otherwise in the case where the parties
have a genuine common intention, where the outcome will be shaped by
that intention, rather than by the value of any contributions they may have
made: so if C contributes a third of the price of the house, but C and D
agree that C should have a half share, an unjust enrichment claim would
give C a third of its value, but our jurisdiction would yield a half share.
(There is a possible further difficulty as regards relief. Under our
jurisdiction, C is invariably awarded a beneficial interest. It is not clear
that an unjust enrichment claim should elicit such a proprietary response,
as opposed to an in personam money liability. But this is one of the most
difficult, and certainly unsettled, issues in the law of restitution,77 so the
latter cannot necessarily be declared at odds with our jurisdiction on this
account.78 )
75 As in Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432.

76 As in Abbott v Abbott [2007] UKPC 53.
77 See the widely differing treatments in Burrows, The Law of Restitution, 2nd edn (2002), at pp.6075,
Goff and Jones, The Law of Restitution, 7th edn (2006), Ch.2; Worthington, Equity (2003), Ch.9; Birks,
Unjust Enrichment (2003), Ch.8. For judicial discussion, see the Canadian decisions Pettkus v Becker
[1980] 2 SCR 834; (1980) 117 D.L.R. (3d) 257; Sorochan v Sorochan [1986] 2 SCR 38; (1986) 29 D.L.R.
(4th) 1; Peter v Beblow [1993] 1 SCR 980; (1993) 101 D.L.R. (4th) 621. These decisions display both
a greater acceptance of proprietary relief than many would think rightthough on a discretionary basis,
which may facilitate that positionand the slipperiness of the ideas by which it is decided whether such
relief shall be available.
78 According to the powerful argument advanced in Birks, Unjust Enrichment (2003), Ch.8, unjust
enrichment relief should be proprietary where the claim involves an initial failure of basis, as where C
mistakenly believes that he already has an interest in the house; but personal where the claim involves
a subsequent failure of basis, as where D fails to perform his promise to give C such an interest. In
practice, applying this distinction would often be difficult in our situation, given the rather unfocused
quality of the typical facts.
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Effectuating the implications of the parties relationship

In the kind of situation with which we are concerned, C and D will
generally be in some sort of family relationship. It may be right to give C
an (enlarged) interest because that is what the relationship itself requires.
Say C and D are married or civil partners. Their relationship generates
at any rate a moral obligation on each of them to share their resources
with the other. The resources in question here are of many different kinds,
but one kind is material wealth. (With all my goods I thee endow . . .
for richer, for poorer . . ..) There are of course various ways in which
the obligation to share material wealth can be understood, but a central
candidate is that such wealth should simply belong equally (during the
currency of the relationship jointly) to the parties. It is this understanding
that has in recent years been translated into a legal rule that, in the event of
the relationships dissolution, such of the parties assets as are not required
for more specific needs should be divided equally.79 This rule does not
itself bite before dissolution, but its underlying logic clearly applies at that
stage too, so it is right to expect a sister rule working on the same lines
from the outset. (A law lacking such a rule, moreover, would perversely
present an incentive to divorce.) In the absence of statutory provision, this
latter rule would naturally operate via a constructive trust over the assets
of the wealthier party.
Outside marriage or civil partnership, an essentially similar argument
can in principle be made, but its precise import will depend on the
implications of the individual relationship in question. If the parties
are committed to sharing their material wealth, the upshot will be just
as though they were married or civil partners. But there will no such
outcome if, while committed in other ways (for example, in respect of
sexual fidelity), they keep their material affairs quite separate. Intermediate
positions are also possible. In practice, however, it will often be difficult
to say what a particular relationships implications might be; especially in
respect of material wealth, a topic to which the parties themselves may not
devote focused attention. So it would be unsurprising if the law baulked
at attempting to effectuate such relationships implications.80
How does our jurisdiction compare with such a project? Plainly, there
is a very good fit where C and D have no genuine common intention, but
do have what we have termed a materially communal relationship. Then,
according to the account suggested above, a common intention will be
imputed that they should have equal shares (as in Abbott v Abbott): which
79 White v White [2001] 1 A.C. 596 and Miller v Miller, McFarlane v McFarlane [2006] UKHL 24;
[2006] 2 A.C. 618; applying the Matrimonial Causes Act 1973 s.24.
80 For consideration of further difficulties in the way of basing claims on the implications of
relationships, see the outstanding essay by Bottomley, in Bright and Dewar (eds), Land LawThemes
and Perspectives (1998), Ch.8.
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is exactly the outcome the present approach would deliver in such cases,
though it would not proceed via an imputed common intention. In these
terms, too, it is unsurprising that where the parties have a non-materially
communal relationship, our jurisdiction should take a different direction,
reflecting instead the parties individual contributions (as in Stack v
Dowden). A non-materially communal relationship is one in which, by
definition, the parties stick with separate accounting. Effectuating its
implications means respecting that, and therefore applying legal redress,
if at all, only on an individualistic basisas we have seen the law does in
such cases, taking what is in effect a restitutionary approach to relief, as it
would between strangers. On this view, too, the primacy given to a genuine
common intention can be understood, as a facility allowing the parties,
even in what would otherwise be a materially communal relationship, to
opt out of the treatment the law would otherwise mete out to them on
that accountthough this does not quite explain why they should then be
treated in accordance with their intentions, when as we have seen there is
a formality problem with that.
CONCLUSIONS
The single name scenario
This article began with the observation that under our jurisdiction, C
can claim whatever interest in Ds house C and D commonly intended he
should have. We noted that one difficulty with this jurisdiction is its lack of
declared basis. We have been investigating whether it can nonetheless be
seen as having a defensible basis, by considering whether the results it generates would also be generated by one or more recognisable legal drivers.
The short answer is that this is sometimes, but not always, the case.
From this point of view, our jurisdiction has three separate aspects.
The first applies to the situation where C and D have no genuine
intention that C should have an interest, but have a materially communal
relationship. Here, the result yielded by our jurisdiction (via an imputed
common intention, shaped by that relationship) is that C gets a half share
in the house. A project of effectuating the implications of the parties
relationship would give the same result. So this aspect of the jurisdiction
may be accounted for in these terms.
The jurisdictions second aspect applies to the situation where, again, C
and D have no genuine intention that C should have an interest, but have a
non-materially communal relationship. Under the jurisdiction (proceeding
via a common intention imputed on the basis of the parties contributions;
the relationship itself having no relevant message), C can claim a share in
the house corresponding to the value of any contributions he has made,
directly or indirectly, to its acquisition. This reproduces the position in
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unjust enrichment, which may therefore be regarded as the basis of this

aspect of the jurisdiction.
The jurisdictions third aspect applies to the situation where, whatever
the nature of their relationship, C and D genuinely intend that C should
have a particular interest in the house. The jurisdiction apparently gives
C that share. This outcome cannot be routinely reproduced using any of
our alternative analyses (though it involves no conflict with them, for
it is natural that the parties genuine common intention should override
such solutions as the alternative analyses would otherwise impose). It
is true that sometimeswhere C, relying on the intention, has lost the
opportunity to acquire the same or an equivalent beneficial interest in
another waythe outcome under discussion may be that required to
redress a reliance loss. But the outcome certainly cannot be justified in
terms of effectuating the parties intention as such: that would require the
intention to have been expressed in writing.
The joint names scenario
This summary has so far focused on the single name scenario: the situation
where the houses title is in Ds name, and C tries to claim a beneficial
interest in it. But remember the joint names scenario, where the title
belongs to both C and D, and prima facie C and D have equal beneficial
interests. C can claim a larger share if that was the parties common
intention . . . though to show this, C must do more than point to disparities
in their contributions: he must first show a common intention that such
disparities should indeed feature in the reckoning. How should we see
this rule in terms of the analysis we have developed?
If the case is one where C and D have no genuine intention that C should
have an interest, but have a materially communal relationship, the question
should not arise: in the context of such a relationship, by definition the
parties shares are equal, so there is no reason to depart from the prima
facie position. At the other extreme, if C and D genuinely intend that Cs
share in the house should be greater than 50 per cent, this intention should
suffice to displace the prima facie inference en route to giving C the share
in question . . . except that, as we have seen, in principle it cannot operate
at all, lacking the necessary formality. As regards those two cases, then,
the rule makes no difference.
That leaves the case where C and D have no genuine intention that C
should have an interest, and have a non-materially communal relationship.
This is where the rule under discussion makes a difference. The basic
approach to such a case is to give C whatever share corresponds to his
contributions to the acquisition of the house, nominally on the strength of
an imputed common intention to this effect, but (as we have seen) actually
on unjust enrichment grounds. In these terms, the rule under discussion
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makes the point that, by taking the transfer into their joint names, C and
D appear to agree to compromise this unjust enrichment claim: so that the
claim cannot arise unless this appearance is negatived, or the compromise
agreement later abandoned. This should occur only if the parties genuinely
agree that it should. Such an agreement should not, however, require
writing. It does not in itself transfer beneficial entitlement from one to the
other: it merely exposes the parties vested entitlements to the possibility
of reallocation by the law, on grounds of unjust enrichment.
Lessons
So in two out of its three aspectsthose not involving a genuine common
intentionour jurisdiction can be seen as in truth well-founded: its effects
can be ascribed to the parties relationship, or to the unjust enrichment
significance of their contributions to the acquisition of the house (as
modified by a compromise agreement, in some cases). But in proceeding
not overtly on the basis of these drivers, but via a fictitious common
intention tacitly reflecting them, the jurisdiction is distracted and opaque.81
By dropping the fiction, the law would escape the difficulties in regard
to the meaning of imputation, and the content of the imputed agreement,
that we noted earlier.
As regards its third aspectthat concerned with genuine common
intentionshowever, the jurisdiction lacks a defensible basis, and needs
reconsideration. Since effectuation of the common intention is prevented
by the want of formality, situations of this kind need to be handled instead,
like the other two kinds, with reference to the parties relationship, where
this is materially communal, or otherwise to their respective contributions
to the acquisition of the house.
The law would do well to get this practically important jurisdiction
properly sorted out. Even if the Law Commissions proposals on the financial consequences of the breakdown of quasi-matrimonial relationships82
are implemented, there will remain a considerable space in which we must
continue to look to the common law83 : in particular, breakdown cases
81 The fiction certainly serves no useful purpose where the true driver is unjust enrichment. Where the
true driver is the implications of the parties relationship, however, the fiction may allow the law to avoid
appearing to proceed on such a basis without statutory cover. Evidence of such thinking appears in Stack
v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [61]. But in truth there should be no such concern,
for the project is already embedded in the law: see text at fn.76 above.
82 Cohabitation: The Financial Consequences of Relationship Breakdown (Law Com. No.307, 2007).
The Government has recently (March 6, 2008) announced that it will not seek to legislate on the basis
of this report until it has discovered and considered the impact of the loosely analogous Family Law
(Scotland) Act 2006. (See http://www.justice.gov.uk/news/announcement060308a.htm [Accessed April 11,
2008].)
83 Note the assumption that the common law will not apply in the space that is covered by the
Commissions proposals. The Commission recommends a rule to this effect: Law Com. No.307, paras
4.1324.146 (and see too para.5.64). The recommendation may make sense in terms of reducing the
complexity and cost of disputes (para.4.135), but at the level of principle it is more troublesome. The
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involving relationships not covered by those proposals84 or by the Matrimonial Causes Act 1973, and pre-breakdown cases involving relationships
of all kinds, including marriage and civil partnership (as where D, being
the sole legal owner of a house, mortgages it, only for C later to claim that
some proportion of the beneficial entitlement was not Ds to dispose of).85
As we have seen, the sorting out would not in fact involve an enormous
change in direction. Outcomes in cases that are presently handled via
an imputed common intention are already sustainable in principle; only
the rhetoric would need to change, to something more transparent and
so potentially less confusing. Genuine but unwritten common intentions
would no longer be effectuated, but the treatment of such cases would
simply assimilate to that of cases with no such intentions.
SIMON GARDNER.*
common law jurisdiction should be superseded by the new scheme only if the latter addresses, albeit in
a necessarily modified way, the same claims as the former. The new scheme focuses (though not in the
precisest possible way: para.4.38) on the relief of some, though not all, instances of reliance loss and
unjust enrichment (paras 4.334.36). In so far as C has a claim against D to which this scheme is not
addressed, that claim should in principle remain available. The Commission does not discuss this issue. To
do so would require an exposure of all the sorts of claim that the common law does and should recognise
in this area, something which the Commission does not undertake. (The Commission draws an analogy
with matrimonial ancillary relief claims, which are understood to eclipse all other proceedings between the
parties: para.4.146. The analogy is however unsound, as matrimonial ancillary relief proceedingsunder
the Matrimonial Causes Act 1973 s.24are calculated to effect an all-things-considered rearrangement
of the parties entire assets: something to which the proposed scheme for cohabitants does not aspire.)
84 Which are limited to (with certain detailed qualifications) persons who are neither married to each
other nor civil partners but who [live] as a couple in a joint household (Law Com. No.307, para.3.13),
and who either have a child (para.3.31) or have lived together in this way for a minimum qualifying
period, which might be fixed somewhere between two and five years (para.3.45). The words as a couple
are aimed at excluding those who are blood relatives or [in] caring relationships and commercial
relationships (para.1.19).
85 In Stack v Dowden [2007] UKHL 17; [2007] 2 A.C. 432 at [52], Lady Hale suggests that these
cases might in future be dealt with on an express trust basis, if transferees were required to declare
their interests on a Land Registry form (thus providing the necessary formality) as a precondition to
being registered as proprietors. (In fact, there may already be such a requirement: see Moran, Anything
to Declare? Express Declaration of Trusts in Land Registry Form TR1: The Doubts Raised in Stack v
Dowden [2007] Conv. 364.) But this expedient cannot cover the whole ground. In particular, it cannot
apply to a case where D acquires the house before ever becoming involved with C.
* Fellow of Lincoln College, Oxford.
Authority; Beneficial interests; Common law; Constructive trusts; Family property; Implied
trusts; Intention
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JUSTIFYING THE REMEDIES FOR DISHONEST

ASSISTANCE
I. INTRODUCTION
DETERMINING when a third party accessory to a breach of trust or breach
of fiduciary duty should be liable in equity has preoccupied judges and
commentators since the advantages of such liability in relation to corporate
mismanagement and fraud became apparent in the late 1960s.1 It is now
settled that dishonesty is the test for such liability (apart from where the
basis of the claim is that the third party has received trust property).2 The
third partys conduct must breach the standards of an honest person with
his or her attributes and in those circumstances.3 Hence, it is an opportune
time to consider a topic that has not received as much attention: the remedy
for the dishonest assistance claim. If a third party (D) dishonestly assists
in a breach of duty by a trustee or other fiduciary (F), what remedies should
be available to the claimant beneficiary or claimant principal (C)?
Little attention has been given in the case law to this question, other
than to debate whether the liability is appropriately described as being that
of a constructive trustee.4 Generally, it is assumed that the remedy is
compensatory. Surprisingly, given the volume of case law, the possibility
of gain-based remedies has arisen only recently in England, and only
at first instance5 ; however, scenarios in which a gain-based remedy for
dishonest assistance may be appropriate can readily be envisaged. When,
for example, if ever, will D who, at Fs invitation, exploits a business
opportunity that should first have been offered to C, be liable to account
for a resulting profit? And, if both F and D share the resulting profits, can
D be liable for Fs profits as well? And, more controversially, can that
1 See, e.g. Selangor United Rubber Estates Ltd v Cradock (No.3) [1968] 1 W.L.R. 1555. Accessory
encompasses a third party who procures, participates or assists in the breach of duty. Breach of trust, as
well as breach of fiduciary duty, is referred to in order to emphasise that a misapplication of property
need not be involved.
2 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 A.C. 378 (Royal Brunei Airlines); Twinsectra Ltd v
Yardley [2002] UKHL 12; [2002] A.C. 164; Barlow Clowes International Ltd v Eurotrust International Ltd
[2005] UKPC 37; [2006] 1 W.L.R. 1476. The position in Australia remains unsettled: Farah Constructions
Pty Ltd v Say-Dee Pty Ltd (2007) 230 C.L.R. 89 at 159161, per Gleeson C.J., Gummow, Callinan,
Heydon and Crennan JJ.
3 Royal Brunei Airlines [1995] 2 A.C. 378; Barlow Clowes International [2005] UKPC 37; [2006] 1
W.L.R. 1476.
4 See, e.g. Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 A.C. 366 at [140][142] per
Lord Millett; Giumelli v Giumelli (1999) 196 C.L.R. 101 at 112, per Gleeson C.J., McHugh, Gummow
and Callinan JJ.
5 Fyffes Group Ltd v Templeman [2000] 2 Lloyds Rep. 643; Ultraframe (UK) Ltd v Fielding [2005]
EWHC 1638; [2006] F.S.R. 17; Sinclair Investment Holdings SA v Versailles Trade Finance Ltd [2007]
EWHC 915; [2007] 2 All E.R. (Comm) 993.
445
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gain-based liability ever be proprietary in nature? Nor has much attention

been given, until recently, to the relationship between the nature of liability
and the appropriate remedy.6 Yet I argue that the remedy available against
a dishonest assistant should depend upon the justification for awarding a
remedy at all. Answering the question, why is a remedy warranted, will,
in large measure, suggest the appropriate remedy and how it is to be
assessed.
II. THE RATIONALES AND NATURE OF DISHONEST ASSISTANCE LIABILITY
(a) The principled and pragmatic rationales
The rationale for dishonest assistance liability has both principled and
pragmatic features.7 The principled basis of the rationale is that Equity
intervenes because there is wrongful conduct. The relevance of this for
determining the remedy, including whose wrongful conduct is in issue,
that of F or D, will be discussed more fully below. There are also two
pragmatic reasons why Equity imposes liability upon dishonest assistants:
(i) to provide C with an alternative means of recourse thereby
increasing Cs chances of a successful claim in the event that
F is impecunious or has absconded; and
(ii) to deter third party participation in breach of trust or fiduciary
duty, thereby restricting the opportunities for wrongdoing by
trustees and fiduciaries.8
These pragmatic features of the rationale for liability reflect the strongly
prophylactic nature of the fiduciary obligation and the high value placed
on the rights of principals. In short, this form of third party liability is used
to bolster the protection given to the principals of fiduciary relationships.
How, then, might these pragmatic grounds for dishonest assistance
liability influence the available remedies? One could argue that they justify
the same remedies being available against the dishonest assistant as are
available against a defaulting trustee or other fiduciary; that is, both lossbased and gain-based remedies. This would ensure that C is fully protected
in the event of breach and would provide a strong deterrence to third
parties. Relying on the pragmatic rationale alone to justify a range of
remedies, however, requires an expansive view to be taken of the rights
of beneficiaries and principals. There is no doubt that, historically, trust
beneficiaries and the principals of other fiduciary relationships were very
6 The leading commentary is Elliott and Mitchell, Remedies for Dishonest Assistance (2004) 67
M.L.R. 16.
7 Royal Brunei Airlines [1995] 2 A.C. 378 at 386387, per Lord Nicholls of Birkenhead; Consul
Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 C.L.R. 373 at 397, per Gibbs J.
8 Royal Brunei Airlines [1995] 2 A.C. 378 at 386387, per Lord Nicholls of Birkenhead; Consul
Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 C.L.R. 373 at 397, per Gibbs J.
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well protected by Equity.9 Thus, it is not inconsistent with the doctrinal

history of trusts and other fiduciary relationships that the rights of C
would be favoured over third parties. But given that there are other checks
and balances on both fiduciaries and third parties nowadays (through
the evolution of negligence law and through legislative regulation, for
example), and that there are clear signs of judicial disquiet with the
stringency of some principal-favouring rules in fiduciary law,10 a sound
basis for justifying any remedy for dishonest assistance should address
more directly the balance of the rights of C with those of D, and therefore
should be found in the principled (wrong-based) aspect of the rationale.
The remedy available, in other words, should depend upon the nature of
the wrongdoing that Equity intervenes to address.
This is not to say that the pragmatic aspect of the rationale will
never be of assistance with respect to remedy. It is of relevance in,
first, strengthening any justification given by the principled rationale; and
secondly, in settling the bounds of any remedy justified by the principled
rationale. So if the principled aspect of the rationale justifies a lossbased remedy (compensation) being available, the pragmatic aspect of the
rationale may influence how compensation is to be assessed. For example,
the pragmatic rationale would support a generous, claimant-favouring,
approach to determining the limits of liability for losses flowing, as a
matter of fact, from the dishonest assistance.11 Thus, it is necessary to
consider the principled, wrong-based, aspect of the rationale and this raises
the question of the nature of the liability: is it primary or secondary or,
in other words, whose wrongdoing grounds the liability?
(b) Primary or secondary liability?
Two models of dishonest assistance liability can be drawn out of the
substantial body of recent commentary and case law concerning dishonest
assistance. Each model links the nature of the liability to the remedies
consequently available. Model A is taken from an influential Modern
Law Review article by Steven Elliott and Charles Mitchell.12 Model B is
9 Finn, The Liability of Third Parties for Knowing Receipt or Assistance in Waters (ed.), Equity,
Fiduciaries and Trusts (1993), p.195 at 197.
10 See, e.g. Murad v Al-Saraj [2005] EWCA Civ 959; [2005] W.T.L.R. 1573.
11 Such as applies to breach of fiduciary duty claims: Re Dawson (1966) 84 W.N. (Pt I) (N.S.W.) 399;
Target Holdings Ltd v Redferns [1996] A.C. 421.
12 Elliott and Mitchell, Remedies for Dishonest Assistance (2004) 67 M.L.R. 16. The seminal work
applying the notion of secondary civil liability to equitable third party liability is Sales, The Tort of
Conspiracy and Civil Secondary Liability [1990] C.L.J. 491. Sales thesis was adopted by Charles
Harpum although Harpum does not discuss its implications with respect to remedy: see, e.g. Harpum,
The Basis of Equitable Liability in Birks (ed.), The Frontiers of Liability, Vol.1, (1994), at p.9. The
most comprehensive discussion of Sales thesis in relation to the remedies for dishonest assistance is
given by Elliott and Mitchell. See also Mitchell, Assistance in Birks and Pretto (eds), Breach of Trust
(2002), at p.139.
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implicit in much of the English case law and commentary on dishonest

assistance.
According to Model A, Ds liability is a form of civil secondary liability
analogous to common law (and even criminal law) secondary liability, the
tort of interference with contract being an example of the same form of
liability13 :
(i) D becomes liable for the breach of a duty owed by F by reason
of Ds involvement (dishonest assistance) in the breach. The
wrongful conduct which grounds the principled rationale for
equitable intervention is the breach of trust or fiduciary duty
itself; D thus assumes the same liability in relation to the same
wrong as F.
(ii) Liability is triggered if Ds conduct was dishonest.14
(iii) Because Ds liability is secondarily linked to Fs wrong it
duplicates the liability of F. This suggests that both loss-based
and gain-based remedies (including those in proprietary form)
are available; however, the remedy can be only whatever is
actually available against F.
Conversely, Model B focuses directly upon Ds conduct15 :
(i) Ds liability is a primary liability. The relevant wrongful
conduct, therefore, is Ds own conduct in procuring or
assisting with the breach of trust or fiduciary duty.
(ii) Liability is triggered if Ds conduct was dishonest.
(iii) The remedy is loss-based. D must compensate C for losses
resulting from the breach of trust or fiduciary duty.
Models A and B are two extremes; there are, of course, permutations
of these models and not all commentators necessarily adhere to each
element as presented here. For example, one permutation would be
secondary liability (Model A, element 1) with equitable compensation
as the only remedy (Model B, element 3).16 Conversely, Lord Nicholls of
13 Sales, The Tort of Conspiracy [1990] C.L.J. 491 at 492, fn.4; Elliott and Mitchell, Remedies
for Dishonest Assistance (2004) 67 M.L.R. 16 at 17. For arguments against a general theory of civil
secondary liability see Carty, Joint Tortfeasance and Assistance Liability (1999) 19 L.S. 489; Gardner,
Knowing Assistance and Knowing Receipt: Taking Stock (1996) 112 L.Q.R. 56 at 73.
14 This form of civil secondary liability is to be distinguished from vicarious liability: Sales, fn.12
above, at 502.
15 See, e.g. Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 A.C. 164 at 194, 200201, per Lord
Millett; Carty, Joint Tortfeasance (1999) 19 L.S. 489. Sarah Worthington may endorse Model B as she
refers to the liability as a civil wrong analogous to the tort of inducing breach of contract and the remedy
as compensation for harm resulting from trust breaches. Equity, 2nd edn (2006), at pp.189191. See
also Loughlin, Liability for Assistance in a Breach of Fiduciary Duty (1989) 9 O.J.L.S. 260. Patricia
Loughlin does not use the terminology of tort and does not accept element 2 of Model B. And see Elliott
and Mitchell, Remedies for Dishonest Assistance (2004) 67 M.L.R. 16 at 46.
16 This is more consistent with common law forms of secondary liability. It may be that the English
case laws focus upon equitable compensation as the only remedy for dishonest assistance has obscured
the full implications of Sales thesis; indeed, this is what Elliott and Mitchell argue in Remedies for
Dishonest Assistance (2004) 67 M.L.R. 16.
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Birkenhead, writing extra-judicially, appears to accept primary liability,

with the remedy of account of profits being available in appropriate
cases.17 Nonetheless, Models A and B represent two extreme versions of
the equitable liability that are clearly presented in the current commentary
and/or implicit in the case law.18
(c) Model A (secondary liability)
The secondary liability model does not withstand close scrutiny. The
problem is in understanding why a dishonest third partys conduct should
not be characterised as wrongful in itself; that is, why is it not a justiciable
wrong, and therefore a primary liability, in and of itself, to procure or assist
in anothers breach of a legal duty? Primary liability appears to be the most
straightforward analysis of the equitable claim; Ds conduct is wrongful
and leads to a primary liability which is joint and several with that of
F.19 Patricia Loughlin explains the wrongfulness of Ds conduct as Ds
exploitation of Cs vulnerability resulting from the fiduciary relationship;
that is, there is an increased risk of improper advantage-taking by the
third person by reason of the initial fiduciary relationship.20 Similarly,
the High Court of Australia in several cases has referred to the inequitable
character of a third party with knowledge of the breach of trust or fiduciary
duty retaining a benefit resulting from that breach of duty.21 Again, the
reasoning is that it is wrongful in equity to exploit the vulnerability of C
(on the High Courts formulation, by making a gain from the breach of
Fs duty). This can be seen as the expression of a tort theme in equity;
equity intervenes here to protect persons in positions of vulnerability
from exploitation or manipulation at the hands of another with whom
the former is in a close neighbourhood relationship.22 On all these
approaches, Ds wrongdoing is in his or her exploitation of the fiduciary
relationship.
There are other reasons why Model As characterisation of the liability
as secondary is not compelling. If Ds liability is secondary to Fs liability,
17 Knowing Receipt: the Need for a New Landmark in Cornish, Nolan, OSullivan and Virgo (eds),
Restitution: Past Present and Future (1998), p.231 at 244.
18 It is misleading, however, to take at face value references in the case law to primary or secondary
liability as there are few, if any, substantive discussions of the point. For example, Elliott and Mitchell,
Remedies for Dishonest Assistance (2004) 67 M.L.R. 16 at 20 cite two Australian cases for the
proposition that liability for dishonest assistance is a secondary, derivative liability. The cases cited
are Australian Securities Commission v AS Nominees Ltd (1995) 62 F.C.R. 504 and Capital Investments
Corp Pty Ltd v Classic Trading Pty Ltd [2001] FCA 1385 at [330], per Weinberg J. With respect, neither
case provides unequivocal support for their position.
19 Cowper v Stoneham (1893) 68 L.T. 18. The reasons for imposing joint and several liability are
discussed in Part III.
20 Loughlin, fn.15 above, at 263.
21 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 C.L.R. 373 at 397, per Gibbs J;
Zhu v Treasurer (NSW) (2004) 218 C.L.R. 530 at 571, per Gleeson C.J., Gummow, Kirby, Callinan and
Heydon JJ.
22 Finn, Equitable Doctrine and Discretion in Remedies in Cornish et al., fn.17 above, p.17 at 259.
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this logically entails that D cannot be liable where F is not liable; but
what of a breach of trust by an honest trustee who is able to rely on an
exclusion of liability clause in the trust deed; that is, a trustee who never
incurs liability? There is no reason why a dishonest D should be able to
avoid liability because he or she dealt with an honest trustee yet Model A
suggests this outcome. Similar questions arise in relation to fiduciaries.23
The secondary liability model downplays Ds role in the breach of Fs
duty yet D may be the instigator of the breach and F merely Ds innocent
tool in that enterprise. Given that the extent of wrongdoing by F and D can
vary greatly it is preferable to consider Ds conduct directly rather than
through the lens of Fs wrongdoing. A model of liability is needed that
can differentiate between the two; and Model A does not do this. Thus,
whilst Ds liability is secondary in the weak sense that one element of
the liability is proof of anothers breach of trust or other fiduciary duty,
Ds liability should not depend upon a remedy being available against F:
D is liable because of his or her own independently wrongful conduct and,
hence, the liability is primary in nature as suggested by Model B. In Lord
Nicholls words, writing extrajudicially, breach of trust and dishonest
participation in a breach of trust are two species of equitable wrongs.24
(d) Model B (primary liability leading only to compensatory remedy)
Under Model B the remedy for dishonest assistance is limited to equitable
compensation on the basis that the equitable claim is analogous to the
common law tort of interference with contract.25 It is assumed that the
nature of Ds wrongdoing, exploitation of Cs vulnerability, is adequately
addressed by awarding compensation for any resulting harm.26 It is
fallacious, the argument goes, to equate Ds wrongdoing with that of
F, and therefore as warranting gain-based remedies, because D has not
undertaken the same loyalty obligation as F and does not owe a fiduciary
duty. Accordingly, it is said that gain-based remedies are only warranted
in relation to a trustee or fiduciary because they have undertaken not to
profit from their positions without the informed consent of C. The third
party who profits from his or her involvement in the breach of trust or
fiduciary duty has not breached any such undertaking.27 Thus, according
to Model B, the primary liability of D is different in kind to the primary
liability of F, and warrants less extensive remedies.
23 See, e.g. Yeshiva Properties No.1 Pty Ltd v Marshall (2005) 219 A.L.R. 112 (F secured waiver of
liability from C who then sued D).
24 fn.17 above, at p.244.
25 See, e.g. Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 A.C. 164 at 200201, per Lord Millett.
26 Loughlin, Liability for Assistance (1989) 9 O.J.L.S. 260.
27 See, e.g. the defendants argument in Fyffes Group Ltd v Templeman [2000] 2 Lloyds Rep. 643
at 669, per Toulson J. See also Sinclair Investment Holdings SA v Versailles Trade Finance Ltd [2007]
EWHC 915; [2007] 2 All ER (Comm) 993 at [124][125], per Rimer J.
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Of course, a loss-based remedy for dishonest assistance is easily

justified given the principled rationale for liability. At the very least, D
should compensate C for loss resulting from Ds wrongful conduct. If
any further support is needed for this proposition it can be found in the
remedy available for the common law tort of interference with contract. It
must be at least as wrongful to interfere with a fiduciary relationship as it
is to interfere with a contractual relationship.28 There is a separate issue
regarding how that loss should be quantified; as will be discussed below,
the current rules for assessing equitable compensation in relation to third
parties mean that the loss-based remedy can be onerous. Nonetheless, the
availability of a loss-based remedy, in principle, is uncontroversial.
However, if the liability is considered primary in nature, is a gainbased remedy equally justifiable? The proposition that so long as C is
compensated for loss then D may keep any additional profits resulting
from his or her wrongful conduct is not self-evident.29 It is true that D
has not given an undertaking of loyalty; but nonetheless, if he or she has
dishonestly interfered with the trust or fiduciary relationship for profit,
thereby exploiting Cs vulnerability, this constitutes significant equitable
wrongdoing for which a gain-based remedy might be available. Gibbs J.
in Consul Development Pty Ltd v DPC Estates Pty Ltd took this approach:
If . . . the [fiduciary conflict of interest] rule is to be explained
simply because it would be contrary to equitable principles to allow
a person to retain a benefit that he had gained from a breach of
his fiduciary duty, it would appear equally inequitable that one who
knowingly took part in the breach should retain a benefit that resulted
therefrom.30
On this approach, the wrongdoing of F and D, whilst separate and
distinct, are equally unmeritorious and exploitative of the vulnerable; and,
arguably, both warrant a gain-based remedy when appropriate.
Nonetheless, does the similarity of equitable dishonest assistance
liability with the common law tort of interference with contract warrant
confining the equitable remedy to compensation as Model B suggests?
A problem with Model B is that in seeking consistency with the tort of
interference with contract insufficient attention is given to the differences
between the equitable liability and the common law liability. Under the
equitable liability D exploits a duty of undivided loyalty rather than the
duty to perform a contract; there is a qualitative difference between these
two duties which justifies a greater range of remedies being available
28 Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 A.C. 164 at 201, per Lord Millett.
29 Lord Nicholls fn.17 above, at p.244.
30 (1975) 132 C.L.R. 373 at 397. See also Zhu v Treasurer (NSW) (2004) 218 C.L.R. 530 at 571, per
Gleeson C.J., Gummow, Kirby, Callinan and Heydon JJ. See also Lord Nicholls fn.17 above.
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in relation to interference with the former duty. The duty to perform

ones contractual obligations is qualified in several ways in order to
accommodate, for example, the efficient operation of the market and the
protection of the contracting parties respective autonomies. Therefore, it
will not necessarily be regarded as wrongful for a third party to retain an
economic benefit resulting from the wrongful interference with anothers
contractual obligations, so long as the innocent party is compensated for
any loss. Conversely, the liability of a fiduciary is strict; F can only escape
liability if C gives fully informed consent to the breach. The function of
the fiduciary obligation is to ensure that F is loyal to C in a relationship of
inequality; there are no competing economic or autonomy considerations
to be balanced with this obligation and which might justify D retaining
benefits resulting from dishonest assistance in the breach of fiduciary
duty.31
In any event, it is a mistake to assume that the common law necessarily
has got it right in relation to its remedial scheme. The debate over
whether gain-based remedies should be available in relation to breach of
some common law duties shows that the need for equitable wrongs to
be remedially consistent with common law wrongs has to be carefully
thought through.32
(e) Further justifying gain-based remedies
The pragmatic aspects of the rationale for dishonest assistance liability,
particularly the second ground of deterrence, add weight to allowing gainbased remedies. If third party liability is effectively to deter breaches of
trust and fiduciary obligation then it must be possible to require D to give
up profits derived from the dishonest assistance. The pragmatic rationale is
especially weighty where F and D are not independent actors; for example,
if both are likely to derive benefit from the gain regardless of who receives
it. So, for example, if D is closely related to F, or is a company controlled
by F, or vice versa, it makes little sense to limit the availability of gainbased remedies to F. An early authority illustrating this point is the Privy
Council case of Cook v Deeks.33 D was a company formed by F to take
over the contract entered into by F in breach of fiduciary duty to C. Lord
Buckmaster L.C., on behalf of the Privy Council, held that as D had full
31 A similar argument is made by Worthington, Reconsidering Disgorgement for Wrongs (1999) 62

M.L.R. 218 at 236237. Worthington argues gain-based remedies are justified in relation to breach of
fiduciary duty because of the social value attached to the fiduciary relationship; and thus the object of
the remedies is to prevent breaches occurring at all, rather than simply to remedy resulting harm. Her
arguments apply equally to third parties.
32 See, e.g. Att-Gen v Blake [2001] 1 A.C. 268; McInnes, Account of Profits for Common Law
Wrongs in Degeling and Edelman (eds), Equity in Commercial Law (2005), at p.405.
33 [1916] A.C. 554.
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knowledge of the breach of duty (F was Ds controlling mind and will),

an account must be directed against it.
It might be argued that such cases are simply instances of piercing the
corporate veil; that is, the fiduciary and corporate third party are treated as
interchangeable entities where the former is the controlling mind and will
of the latter.34 On this interpretation of the cases, gain-based remedies
are not necessarily available for dishonest assistance per se but will be
available where D is treated as indistinguishable from F. But such an
interpretation does not explain all of the authorities where a gain-based
remedy against D has been recognised. For instance, several Australian
cases have involved fiduciaries poaching business from their respective
employers with the dishonest assistance of their wives or friends as well
as, or instead of, companies created to conduct the new businesses; and
gain-based remedies have been awarded against the third parties whether
or not controlled by F.35
There are also Australian authorities where a gain-based remedy was
awarded (or would have been available had all the elements of the
action been found) against a completely independent third party. In
Consul Development Pty Ltd v DPC Estates Pty Ltd, for example, the
relationship between F and the controlling mind of D (Clowes) was that
of fellow employees of C (Clowes as an articled clerk and F as a real
estate adviser and manager).36 F and D were independent actors and
not likely to benefit from each others separate and distinct profit; thus
there was no implication that they were being treated interchangeably for
the purposes of remedy. And in United States Surgical Corp v Hospital
Products International Pty Ltd, overturned on appeal on other grounds, a
constructive trust was imposed over the assets of D, a public company
unrelated to F.37 Similarly, in the English case of Fyffes Group Ltd v
Templeman, D was an independent company, seeking to do business
with C, who bribed F in order to secure contracts with C.38 Toulson
J. held that, in principle, a gain-based remedy was available against
C. These authorities, from Cook v Deeks onwards, suggest that Ds
liability, although separate and distinct from that of F, warrants gain-based
remedies.
The strongest case for a gain-based remedy being available is where
the gain is one that could have been made by C; for example, where D
34 See, e.g. Sinclair Investment Holdings SA v Versailles Trade Finance Ltd [2007] EWHC 915; [2007]
2 All ER (Comm) 993 at [104] and [132][133], per Rimer J. Such an argument (made in relation to
Cook v Deeks [1916] 1 A.C. 554) was rejected in Fyffes Group Ltd v Templeman [2000] 2 Lloyds Rep.
643 at 669670, per Toulson J.
35 Timber Engineering Co Pty Ltd v Anderson [1980] 2 N.S.W.L.R. 488; Colour Control Centre Pty
Ltd v Ty NSWSC (Eq. Div.) July 24, 1995.
36 (1975) 132 C.L.R. 373.
37 [1983] 2 N.S.W.L.R. 157.
38 [2000] 2 Lloyds Rep. 643.
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exploits a business opportunity that should have been offered by F to C.

In a very loose sense there is a causal nexus between Ds gain and Cs
loss, even if the two are not identical, and even though it is not possible
to trace from C to D. C has missed out on the opportunity to exploit the
business opportunity which D has exploited; and in that sense, assuming
that C would have exploited the opportunity at least as well as D, then Cs
loss can be equated with Ds gain. Indeed, it may be that the distinction
in such cases between a gain-based, and loss-based, remedy is sometimes
overlooked and compensation equating with the third partys gain is
awarded.
The New South Wales Supreme Court decision of Colour Control
Centre Pty Ltd v Ty explicitly recognised the distinction between the
loss-based and gain-based remedy for Ds exploitation of a business
opportunity that should have been offered to C; and provides a helpful
model for assessing a gain-based remedy in loss of business opportunity
cases.39 In that case, Santow J. assessed Cs losses resulting from the
breach of fiduciary duty as
the profits [C] would have made if [C] had secured and retained
the [business opportunity]. . .multiplied by the chance that the work
would have been obtained, which I have estimated at 30%.40
And he assessed Ds profits for which they should account as being the
total profit made from the business opportunity discounted by 20 per
cent to reflect Ds time, energy, skill, and financial contribution.41 He
assumed that C would elect the latter, higher, sum.
Is it possible to go further, however, and argue that a gain-based remedy
against D is justifiable, given the primary nature of Ds liability, even
where C has suffered no loss at all? Clearly, a fiduciary is liable to account
for profits resulting from a breach of fiduciary duty, regardless of whether
C suffered a loss42 ; but does the nature of Ds separate wrongdoing
(dishonest exploitation of Cs vulnerability) justify the same approach
being taken? Would that be to cast D as a fiduciary even though he or she
has undertaken no obligation of loyalty? To some extent this question is
obscured by the fact that the rules for assessing equitable compensation
are so favourable to principals that it is only in extreme cases that C
will be unable to demonstrate any loss; nonetheless, circumstances can be
envisaged where D should still account for his or her gains. One example
is where D actively encourages F to make certain investments, knowing
that this will constitute a breach of the trust or fiduciary duties (due to
39 NSWSC (Eq. Div.) July 24, 1995.
40 At 22.
41 At 24.
42 Boardman v Phipps [1967] 2 A.C. 46.
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a conflict of interest, say) and where Ds conduct is motivated by the

receipt of generous commissions for securing these investments. Even if,
fortuitously, C suffers no loss from the investments, it seems perfectly
appropriate that D be made to account for his or her gain (assuming all
other conditions for liability are met). Such a result can be justified by
the principled aspect of the rationale (Ds wrongdoing) and is further
strengthened by the pragmatic aspect: requiring third parties to disgorge
wrongfully acquired gains has a deterrent effect on such conduct, thereby
preventing potential breaches of the fiduciary obligation by other trustees
and fiduciaries.
(f) Limitations on gain-based remedies
To argue that the principled aspect of the rationale for third party liability
justifies a gain-based remedy, however, does not mean that Ds liability
must be synonymous with that of F; in other words, D need not be treated
as though he or she were a trustee or fiduciary.43 The fact that F has
given an undertaking of loyalty whereas D has not is still relevant. Nor
is the argument that in all cases where D makes a gain from dishonest
assistance in a breach of trust or fiduciary duty, but C suffers no loss,
a gain-based remedy should be awarded; simply that this should be an
available remedial option where the degree of Ds culpability, or close
relationship with F, warrants it. In the example given above, D actively
and deliberately encouraged the breach of duty by F in order to secure the
investment commission; the remedial scope might be different where D
was approached for investment advice and gave it in circumstances that
still constituted dishonest conduct but not of the same degree of culpability
(for example, if D behaved recklessly rather than fraudulently).
This helps to explain the decision not to award a gain-based remedy in
Fyffes Group Ltd v Templeman.44 In that case D bribed F in order to secure
contracts with C. Whilst Toulson J. held that the profits made by D on the
resulting contracts were recoverable in principle, on the facts of the case,
no profit remedy was awarded because it was found that C still would
have entered the contracts with D absent any wrongdoing. The profits that
D made from the contracts were not caused by the bribery but were an
ordinary profit element that would have been earned irrespective of
the breach of duty.45 D was liable simply to compensate C for losses
resulting from the bribery (including, but not limited to, the amount of
the bribes). Thus, compensation was awarded to reflect the extent to which
43 The terminology of constructive trusts to describe Ds liability is inappropriate for this reason.
Contra, Elliott and Mitchell, Remedies for Dishonest Assistance (2004) 67 M.L.R. 16.
44 [2000] 2 Lloyds Rep. 643.
45 [2000] 2 Lloyds Rep. 643 at 672.
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the agreed contractual terms were more favourable to D than would have
been the case without the breach of duty by F.
Whilst Toulson J. in Fyffes Group Ltd v Templeman apparently saw
his reasoning as applying equally to fiduciaries,46 the Court of Appeal in
Murad v Al-Saraj disagreed.47 In that case, a fiduciary was not permitted
to argue that because C would have entered the impugned transaction even
if there had been no breach of fiduciary duty, and hence, F would have
legitimately earned at least some profits, he should only be liable for a
proportion of the profits resulting from the transaction. That is, the same
argument, used successfully by a dishonest assistant in Fyffes Group Ltd
v Templeman, failed when used by a fiduciary in Murad v Al-Saraj.
The decision in Murad v Al-Saraj is consistent with established
principles of fiduciary law.48 Arden and Jonathon Parker L.JJ., in the
majority, apparently assumed that the liability of a fiduciary and a
dishonest assistant are based upon the same principles and on this basis
expressed doubt as to the correctness of Toulson J.s decision in Fyffes
Group Ltd v Templeman. With respect, the two decisions are consistent
if one accepts that the nature of Ds wrongdoing (exploitation of Cs
vulnerability) and the nature of Fs wrongdoing (breaching an undertaking
of loyalty) are different; Fs duties are of a more absolute, prophylactic,
nature and warrant more stringent remedies.
(g) Case law support for Model C
There are some cases to support a model of primary liability leading to
both loss-based and gain-based remedies and which I will call Model C.
As well as the early decision of Cook v Deeks, and the later Australian
cases, most recently in Fyffes Group Ltd v Templeman, Toulson J. rejected
the defendants Model B argument and preferred the approaches of Gibbs
J. in Consul Development Pty Ltd v DPC Estates Pty Ltd and the Privy
Council in Cook v Deeks.49 He concluded that a dishonest assistant was
personally liable to account due to his or her implication in Fs fraud and
if, in fact, extra profits resulting from the bribe alone could be identified
(they could not). Toulson J.s reasoning was confirmed by Lewison J.
in Ultraframe (UK) Ltd v Fielding as applying wherever a dishonest
assistant makes a personal gain resulting from the dishonest assistance
or consequent breach of trust or fiduciary duty; that is, the finding in
46 He cited the leading Australian authority on account of profits for breach of fiduciary duty: Warman
International Ltd v Dwyer (1995) 182 C.L.R. 544 at 561, per Mason C.J., Brennan, Deane, Dawson and
Gaudron JJ.
47 Murad v Al-Saraj [2005] EWCA 959, [2005] W.T.L.R. 1573; McInnes, Account of Profits for
Breach of Fiduciary Duty (2006) 122 L.Q.R. 11.
48 Boardman v Phipps [1967] 2 A.C. 46; Regal (Hastings) Ltd v Gulliver [1967] 2 A.C. 134.
49 [2000] 2 Lloyds Rep. 643 at 670. Toulson J. also drew support from the analogous position of a
third party procuring or assisting in a breach of confidence.
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Fyffes Group Ltd v Templeman did not depend upon special public policy
concerns with respect to bribes.50
III. JOINT AND SEVERAL LIABILITY
Having justified, in broad terms, a model of primary liability for the
equitable wrong of dishonest assistance that allows both loss-based and
gain-based remedies, Model C, does this help in answering two subsidiary
questions concerning the remedy; namely:
(i) should D and F be jointly and severally liable for Cs losses;
and,
(ii) should D and F be jointly and severally liable for their gains?
(a) Joint and several liability for losses51
If Ds liability is to be characterised as a primary liability, as argued
above, it follows in principle that D should be liable only for losses
caused by Ds own wrongdoing; that is, once Ds dishonest assistance
is determined to be a cause-in-fact of Cs losses, the court should consider,
as a normative question, the appropriate scope of Ds liability for those
losses.52 In fact, however, once D is found to have dishonestly assisted F
in the breach of trust or other fiduciary duty, D is held jointly and severally
liable with F for all of Cs losses for which F is liable and which result
from the breach of duty.53 That is, D takes on Fs liability for Cs losses.
Thus, in relation to Cs claim, there is no separate inquiry as to the scope
of Ds liability.54 This can result in D being liable to compensate for
extensive losses suffered by C even though Ds contribution to the breach
of trust or fiduciary duty was relatively minor when compared with that
of F (and vice versa).
50 [2005] EWHC 1638; [2006] F.S.R. 17 at [598][594]. See also Prentice and Payne, Directors
Fiduciary Duties (2006) 122 L.Q.R. 558 at 563.
51 An issue that will not be dealt with here is whether the assessment of equitable compensation for
dishonest assistance should be the same for all breaches of trust, whether breach of a fiduciary duty or
not. See Bristol & West Building Society v Mothew [1998] Ch. 1; Youyang Pty Ltd v Minter Ellison Morris
Fletcher (2003) 212 C.L.R. 484. See also Conaglen, The Nature and Function of Fiduciary Loyalty
(2005) 121 L.Q.R. 452 at 479.
52 Under both systems [common law and equity] liability is fault-based: the defendant is only liable
for the consequences of the legal wrong he has done to the plaintiff and to make good the damage caused
by such wrong. Target Holdings Ltd v Redferns [1996] 1 A.C. 421 at 432, per Lord Browne-Wilkinson.
The terminology of cause-in-fact and appropriate scope of liability is taken from Stapleton, Causein-fact and the Scope of Liability for Consequences (2003) 119 L.Q.R. 388. It was adopted by the Court
of Appeal in Corr v IBC Vehicles Ltd [2006] EWCA Civ 331; [2007] Q.B. 46 at [15], per Ward L.J. and
by the House of Lords in Kuwait Airways Corp v Iraqi Airways Co (No.3) [2002] UKHL 19; [2002] 3
All E.R. 209 at 228, per Lord Nicholls.
53 Cowper v Stoneham (1893) 68 L.T. 18; Trustor AB v Smallbone (No.3), unreported, May 9, 2000,
CA, at [97], per Scott V.C.; Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638; [2006] F.S.R. 17 at
[600], per Lewison J. See also the authorities cited in Mitchell, Apportioning Liability for Trust Losses
in Birks and Rose (eds), Restitution and Equity, Vol I: Resulting Trusts and Equitable Compensation
(2000), at p.211 and Mitchell, fn.12 above, at p.157.
54 Elliott and Mitchell, Remedies for Dishonest Assistance (2004) 67 M.L.R. 16 at 1820.
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The absence of a separate inquiry into the scope of Ds liability for Cs

losses appears to favour Model A (secondary liability); indeed, the few
authorities that specifically address the question of causation in relation to
dishonest assistance are relied upon by Elliott and Mitchell as conclusive
evidence that the English courts support a secondary liability model of
dishonest assistance.55 If the relevant wrongdoing is that of F, D becoming
liable for that wrongdoing through accessorial conduct, then the remedial
focus must be on the consequences of that primary wrongdoing. On this
analysis, the scope of liability inquiry concerns Fs breach of duty, rather
than Ds accessorial conduct. Indeed, according to Elliott and Mitchell,
on the secondary liability, Model A, approach, all that is necessary is that
Ds acts or omissions have at least made the commission of the breach
easier than it would otherwise have been . . ..56 Ds dishonest assistance
constitutes a complicity nexus which substitutes for the scope of liability
inquiry.57
There are two alternative justifications for the joint and several liability
of F and D which are compatible with a primary liability analysis of
dishonest assistance. First, the courts take a generous, claimant-favouring,
approach to the scope of Fs liability when assessing compensation for
losses caused by a fiduciary.58 This is consistent with the prophylactic
characteristics of fiduciary law generally. The pragmatic aspects of the
rationale for third party liability (particularly that of providing C with an
alternative means of recourse) suggest that the same approach be taken
when assessing Ds liability for Cs losses. Thus, whilst as a matter of
principle, a normative inquiry should be conducted in relation to Ds
wrongdoing and the consequent scope of Ds liability, because such issues
can be complex, even on equitys more claimant-favouring rules, all that
C needs to establish is that loss was caused by Fs breach of trust or
fiduciary duty (that is, Fs conduct was a cause-in-fact of Cs losses and
the losses were within the scope of his or her liability); and secondly, that
D dishonestly assisted in the breach and was also a cause-in-fact of Cs
losses. Indeed, it can be argued that the far-reaching consequences of joint
and several liability have been a factor in the English courts endorsement
of a high threshold (dishonesty) for liability; that is, the sort of conduct
by a third party that would lead to a finding of dishonesty warrants that
party bearing the risk of full liability for the loss caused to C.
A second justification for the apparent anomaly of D being held
responsible for Fs liability to C is that it is only in relation to C that
55 Elliott and Mitchell, Remedies for Dishonest Assistance (2004) 67 M.L.R. 16 at 1820; Grupo
Torras SA v Al-Sabah (No.5) [1999] C.L.C. 1469; Casio Computer Ltd v Sayo (No.3) [2001] EWCA Civ
661; [2001] I.L. Pr. 43.
56 At 20.
57 At 1718 quoting from Cooper, Secondary Liability for Civil Wrongs (Ph.D. thesis, University of
Cambridge, 1996). See also Sales, fn.12 above, at 510.
58 See, e.g. Re Dawson [1966] 2 N.S.W.L.R. 211; Target Holdings Ltd v Redferns [1996] A.C. 421.
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questions of relative responsibility are ignored; as between D and F such

issues are relevant, and go to the question of contribution.59 The fact that F
is liable to pay contribution to D if D meets Cs claim for compensation
bears out the argument that the reasons for joint and several liability
are pragmatic and prophylactic rather than a logical consequence of Ds
liability being secondary to that of F. Thus, even on the model of primary
liability argued for in this paper, Model C, Ds joint and several liability
Cs losses can be justified.
(b) Joint and several liability for Fs gains
According to my proposed model of primary liability, Model C, the
remedy available against D should be directed towards Ds wrongdoing;
and therefore it follows that D should not be liable for gains made by
F. Nonetheless, it is possible to conceive of circumstances where liability
for Fs gains might be justified given the degree of Ds culpability. For
example, where F is simply the vehicle for Ds enrichment, and D is the
instigator of the breach of duty, such as where F is a company controlled
by D, it could be argued that D should account for the gains made by F. Of
course, such a claim would only be necessary where F was unable to meet
its liabilities and if it were not possible to trace Fs gains into Ds hands
(thereby activating either recipient liability or proprietary liability). On the
other hand, it may be that such scenarios can be accommodated in other
ways; for example in a corporate setting, where F is a company in which
D has a substantial interest, removing the gains of F may have the indirect
consequence of withholding or removing gains from D.60 Alternatively,
if Fs function is solely to be the vehicle for Ds enrichment then there
may be a case for piercing the corporate veil.61
Characterising Ds liability as secondary, under Model A, on the other
hand, would lead to D being liable for Fs gains because under this model
D assumes Fs liability to C. Conversely, if it is D who makes a gain from
the breach of trust or fiduciary duty, this gain would not be recoverable,
even from D, because it is not a gain for which F is accountable. Elliott
and Mitchell do not endorse these aspects of Model A. In particular, they
consider that holding D jointly and severally liable for gains made by
59 See Finn, fn.9 above, at p.217; Mitchell, fn.53 above, and Mitchell, fn.12 above, at p.157; Gurr,
Beyond the Dishonesty Test: Accessory Liability and Contribution, Release and Apportionment (Honours
thesis, Australian National University, 2006).
60 See, e.g. Warman International Pty Ltd v Dwyer (1995) 182 C.L.R. 544 at 563564, per Mason C.J.,
Brennan, Deane, Dawson and Gaudron JJ. The court noted that an account of profits directed against the
third party company would indirectly achieve a similar result to an account of profits, or constructive
trust, in relation to Fs shareholding in the company.
61 See Trustor AB v Smallbone (No.2) [2001] 1 W.L.R. 1177; Gencor ACP Ltd v Dalby [2000] 2
B.C.L.C. 734; Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638; [2006] F.S.R. 17 at [561][576].
The discussion in these cases concerns the opposite scenario; that is, where D is the corporate entity.
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F goes beyond what is necessary to fulfil the pragmatic and principled

rationales of liability and thus amounts to a punitive measure.
There is a line of Canadian cases supporting joint and several liability
on D for Fs gains on the basis that D is to be treated as though he
or she were a co-trustee or fiduciary. Those cases, however, contain no
discussion of principle and the very difficult questions of law concerning
the contribution rules between co-trustees are not elaborated upon; that
is, whether or not co-trustees are always jointly and severally liable for
each others gains.62 Most recently, Lewison J. in Ultraframe (UK) Ltd v
Fielding adopted the view of Elliott and Mitchell and held that joint and
several liability for gains was not justified as a matter of principle and,
having penal consequences, it went beyond the courts jurisdiction as a
court of equity.63 For the moment then, the English courts seem unlikely
to endorse joint and several liability for gains except where a case can be
made for piercing the corporate veil. Such an approach is consistent with
a model of primary liability.
IV. PROPRIETARY REMEDIES
If the arguments so far are accepted, then according to Model C, D should
be subject to a primary liability to C based upon Ds dishonest exploitation
of Cs vulnerability arising from the fiduciary relationship with F. D is
potentially liable for both loss-based and gain-based remedies; but can
this extend to a proprietary gain-based remedy? The remedies in question
are the constructive trust and the equitable lien. Model A and Model B
cannot accommodate these remedies; and, since these models have also
proved inadequate in relation to the remedies discussed so far, will not be
considered further.
(a) When is a proprietary remedy warranted?
A worthwhile exercise is to consider why a proprietary remedy in relation
to Ds profits would ever be warranted given that the pragmatic and
principled rationales of dishonest assistance liability (namely, deterrence
of other dishonest assistants, provision of alternative means of recourse to
62 See, e.g. Canada Safeway Ltd v Thompson [1951] 3 D.L.R. 295 at 323, per Manson J; [1952] 2
D.L.R. 591 at 592 per Manson J; DAmore v Macdonald (1973) 32 D.L.R. (3d) 543 at 549, per Addy
J; Abbey Glen Property Corp v Stumborg (1976) 65 D.L.R. (3d) 235; Macdonald v Hauer (1976) 72
D.L.R. (3d) 110 at 130 per Bayda J.A. Elliott and Mitchell, Remedies for Dishonest Assistance (2004)
67 M.L.R. 16 at 4041. In Australia, see United States Surgical Corp v Hospital Products International
Pty Ltd [1982] 2 N.S.W.L.R. 766 (McLelland J., at first instance, awarded an account of Fs profits
against D and F). Meagher, Heydon and Leeming, Meagher, Gummow and Lehanes Equity: Doctrines
and Remedies, 4th edn (2002), at para.5-245, conclude that McLelland J.s judgment is the only express
Australian endorsement of Ds joint liability for Fs profits and is not supported by the tenor of other
leading authorities on the remedy of account of profits.
63 [2005] EWHC 1638; [2006] F.S.R. 17 at [598], [600].
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C, and redress of Ds wrongdoing) all appear to be met by the personal

remedies of equitable compensation and account of profits. A proprietary
remedy clearly bolsters the alternative means of recourse given to C,
most obviously by enabling C to secure priority over unsecured creditors
of D in the event of Ds insolvency. Prioritising Cs rights over those
of Ds unsecured creditors has no deterrent effect upon D, however,
nor upon other potential dishonest assistants.64 Furthermore, awarding
a proprietary remedy against an insolvent D disrupts the operation of
statutory insolvency regimes and disadvantages unsecured creditors not
implicated in the dishonest assistance.65 Thus, a proprietary remedy is
not warranted where D is unable to meet all of his liabilities. This may be
difficult to determine in practice, however, for the ability of D to satisfy
his or her unsecured liabilities does not necessarily correlate with Ds
insolvency.66
In fact, insolvency protection has not been a relevant factor in Australian
dishonest assistance cases that have contemplated or awarded a proprietary
remedy.67 In each instance, the remedy was directed towards effectively
redressing Ds wrong vis-`a-vis C, rather than in ensuring Cs priority
in the event of an inadequate pool of assets. These cases demonstrate
that there are motivations, other than insolvency protection, as to why
a proprietary remedy might be sought and these are consistent with the
principled rationale for liability.68
First, a proprietary remedy may be the most straightforward means of
ensuring that C is not disadvantaged by Ds wrongdoing. In other words,
although an accurate compensatory award will, in principle, achieve
the same result, a constructive trust will most effectively redress Ds
wrongdoing. An example is where D dishonestly uses non-confidential
information, imparted by F in breach of fiduciary duty, to exploit a
property redevelopment opportunity that should have been offered to C.69
A court may order D to account for his profits; however, this may not
reflect the gain that C could have made if given the opportunity by F to
exploit the information, particularly where the opportunity is not yet fully
64 Worthington, Equity (2006), at p.125. Virgo, Principles of the Law of Restitution, 2nd edn (2006),
p.534.
65 Re Polly Peck International Plc (No.2) [1998] 3 All E.R. 812.
66 Evans, Defending Discretionary Remedialism (2001) 23 Sydney L.Rev. 436 at 479.
67 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 C.L.R. 373; Timber Engineering Co
Pty Ltd v Anderson [1980] 2 N.S.W.L.R. 488 (approved by Mason J. in Hospital Products Ltd v United
States Surgical Corp (1984) 156 C.L.R. 41 at 115116); United States Surgical Corp v Hospital Products
International Pty Ltd [1983] 2 N.S.W.L.R. 157 (overturned on appeal on other grounds).
68 Further motivations for a proprietary remedy are given by Evans, Defending Discretionary
Remedialism (2001) 23 Sydney L.Rev. 436 at 474475.
69 See, e.g. Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 C.L.R. 373 (proprietary
remedy sought but elements of claim not found). See also Say-Dee Pty Ltd v Farah Constructions Pty
Ltd [2005] NSWCA 309; where, on similar facts, the NSW Court of Appeal granted a constructive
trust for recipient liability. The finding of a breach of fiduciary duty was overturned on appeal: Farah
Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 C.L.R. 89.
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realised by D. Similarly, C could seek equitable compensation for the loss

of profits discounted by the possibility that C would not have taken up
the opportunity; however, C may be disadvantaged by the difficulty of
accurately assessing such compensation. If a constructive trust is imposed
over the property acquired by D, with appropriate allowances for Ds
expenditure and efforts to date, C can pursue the property development
opportunity. For example, in Consul Development Pty Ltd v DPC Estates
Pty Ltd C sought a constructive trust over the real properties acquired
through Ds exploitation of an opportunity which F should have disclosed
to C.70 The elements of the claim were not made out in the High Court
of Australia and so the remedy sought was not in issue; however, none
of the judges appeared concerned about the constructive trust order made
by the New South Wales Court of Appeal. Thus, if D has usurped Cs
commercial opportunity C should be able, by means of a constructive
trust, to step into Ds shoes and complete the venture.
Similarly, as in the New South Wales Supreme Court decision of Timber
Engineering Co Pty Ltd v Anderson, if company D is created in order
dishonestly to assist F (the manager of C) to divert Cs business to D,
the most effective remedy from Cs point of view may be a constructive
trust over the assets of D to reflect the fact that Ds business is wholly
referable to equitable wrongdoing by F and D.71 Just allowances can be
made for Ds expenses, efforts and skill.
In Ultraframe (UK) Ltd v Fielding Lewison J. held that Timber
Engineering Co Pty Ltd v Anderson was inconsistent with the Australian
High Court decision of Warman v Dwyer 72 ; with respect, however, this is
not so. A proprietary remedy is not as appropriate when, as in Warman v
Dwyer, although a competing business is set up by D and F in breach of
Fs fiduciary duties to C, the success of the endeavour substantially reflects
the skill and efforts of D and F, and the business opportunity would not
have been pursued by C. In Warman v Dwyer a constructive trust was not
sought because it was not a proportionate response to the degree of F and
Ds wrongdoing, not because it was unavailable as a remedial option. An
account of Ds profits for the first two years of operation, with appropriate
allowances, better reflected the extent to which D had gained by the breach
of fiduciary duty in that a large proportion of the continuing success of
70 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 C.L.R. 373.
71 [1980] 2 N.S.W.L.R. 488 at 496497, per Kearney J. A second fiduciary was involved as well
as the wives of the two fiduciaries. All third parties were found to have knowingly participated in a
dishonest and fraudulent scheme. One reading of Kearney J.s decision is that he imposed an equitable
lien over the shares in the third party companies: Meagher, Heydon and Leeming, fn.62 above at para.5250; whereas, in Hospital Products Ltd v United States Surgical Corp (1984) 156 C.L.R. 41 at 115116
Mason J. construed the remedy to be a constructive trust over the business of D. Whilst the judgment is
not clear, it is suggested that Kearney J. awarded both a constructive trust over the assets of the third
party companies and equitable liens over shares held in those companies for the value injected into such
shares by the breaches of fiduciary duties: at 49.
72 Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638; [2006] F.S.R. 17 at [542][545].
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F and Ds enterprise was referable to Fs own skill and efforts.73 Timber

Engineering Co Pty Ltd v Anderson and Warman v Dwyer are perfectly
consistent decisions that illustrate when a proprietary remedy is, or is
not, appropriate. In fact, the remedies awarded in Warman v Dwyer were
equitable charges over the assets of the two third party companies to
secure accounts of profits of the respective companies; that is a, lesser
proprietary remedy was still given.74
A further situation, again unrelated to Ds insolvency, where it might be
desirable for C to seek a constructive trust over property representing Ds
gain from dishonest assistance is if the property is no longer identifiable in
Ds hands but the value inherent in it can be traced to property held by a
third party who is not a bona fides purchaser for value.75 C is limited to a
personal gain-based remedy against D, but also may assert his proprietary
interest in property held by the third party.
Thus, there are motivations other than insolvency protection for
considering a proprietary remedy for dishonest assistance. Such scenarios
occur where, as between C and D, C has the better claim to the assets held
by D; conversely, where D is insolvent, and the competition is between
C and Ds creditors, C does not have a superior claim. The difficulty
of determining whether the competition will be between C and D, or
C and Ds unsecured creditors, may be a practical obstacle to allowing
proprietary remedies; but leaving that to one side for the moment, are
there principled reasons for refusing a proprietary remedy even where D
is not insolvent or likely to become so? Here, an illuminating contrast can
be noted between the law in England and Australia.
(b) Proprietary remedies in England
According to orthodox principles of English law, a proprietary remedy
is only available if C can assert a pre-existing proprietary interest in
Ds property (if necessary, by tracing the value inherent in Cs original
property into substitute property held by D)76 ; or, alternatively, if C can
establish an institutional constructive trust over property held by D.77 An
institutional constructive trust arises automatically upon the occurrence
of specified events and does not involve the ex post facto exercise of
73 Hospital Products Ltd v United States Surgical Corp (1984) 156 C.L.R. 41 at 110, per Mason J.,
citing Re Jarvis [1958] 1 W.L.R. 815 at 820, per Upjohn J.
74 Warman International Ltd v Dwyer (1995) 182 C.L.R. 544 at 570 per Mason C.J., Brennan, Deane,
Dawson and Gaudron JJ.
75 An analogous example is Att-Gen (Hong Kong) v Reid [1994] 1 A.C. 324 (C claimed proprietary
rights to constructive trust property traced from F to D).
76 Foskett v McKeown [2001] 1 A.C. 102.
77 The third option of a resulting trust is not relevant in a dishonest assistance scenario. See
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] A.C. 669 at 714, per Lord BrowneWilkinson.
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judicial discretion.78 The former situation does not depend upon dishonest
assistance liability, for C simply asserts pre-existing proprietary rights.
The question, then, is whether C can claim proprietary rights to property
in Ds hands purely on the basis of Ds dishonest assistance where there
is no proprietary link, through tracing, between C and D. The debate in
England has focused upon constructive trusts rather than equitable liens.
Accepting, for now, the terminology of institutional constructive
trusts, dishonest assistance is not a recognised category in which such
trusts arise in England.79 The closest analogy is that an institutional
constructive trust is said to arise when F acquires property in breach
of trust or fiduciary duty.80 Pursuant to the equitable maxim that Equity
looks on that as done which ought to be done, Equity treats the property
as having been obtained for C, and thus, as belonging to C from the
moment it was received by F.81 Therefore, it is said, the court recognises
a proprietary interest rather than creating one.82 The same reasoning could
be used to justify an institutional constructive trust arising when, as a
result of Fs breach of duty, D acquires property that should have been
acquired, if at all, for C; however, this has not been the case. Furthermore,
the institutional constructive trust arising upon breach of fiduciary duty is
controversial83 ; particularly where the subject-matter of the constructive
trust would never have been received legitimately by C (for example,
where F takes a bribe and converts it to property).84 Critics of the
institutional constructive trust in this context argue, inter alia, that there is
no principled justification for prioritising Cs rights over other unsecured
creditors of D where the property could never have been legitimately
received by C85 and that, in any event, proprietary relief is not necessary
in order to meet the rationale for Fs liability. Given the contested status
of the institutional constructive trust for breach of fiduciary duty, it is
unlikely to be extended by analogy to dishonest assistants.
78 e.g. the constructive trust which arises upon a contract for the sale of land: Pettit, Equity and the
Law of Trusts, 10th edn (2006), at p.163.
79 Re Polly Peck International Plc (No.2) [1998] 3 All E.R. 812. See also Dubai Aluminium Co Ltd v
Salaam [2002] UKHL 48; [2003] 2 A.C. 366 at 404, per Lord Millett.
80 Keech v Sandford (1726) Sel. Cas. Ch. 61; Boardman v Phipps [1967] 2 A.C. 46; Att-Gen (Hong
Kong) v Reid [1994] 1 A.C. 324.
81 Att-Gen (Hong Kong) v Reid [1994] 1 A.C. 324 at 331, per Lord Templeman.
82 Millett, Proprietary Restitution in Degeling and Edelman (eds), Equity in Commercial Law (2005),
at p.324.
83 See, e.g. Burrows, Proprietary Restitution: Unmasking Unjust Enrichment (2001) 117 L.Q.R. 412;
Worthington, Equity (2006), at pp.134138; Virgo, Principles of the Law of Restitution, 2nd edn (2006),
at pp.519525, 607.
84 Att-Gen (Hong Kong) v Reid [1994] 1 A.C. 324.
85 See, e.g. Goode, Proprietary Restitutionary Claims in Cornish et al., fn.17 above, at p.63; Virgo,
Restitution Through the Looking Glass: Restitution Within Equity and Equity Within Restitution in
Getzler (ed.), Rationalizing Property, Equity and Trusts: Essays in Honour of Edward Burn (2003), p.82
at 9698.
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A proprietary remedy for dishonest assistance is said to involve a

remedial constructive trust and the English courts do not recognise such
trusts.86 A remedial constructive trust is an order of the court granting,
by way of remedy, a proprietary right to someone who, beforehand, had
no proprietary right; that is, it allows the court to vary proprietary rights
at the courts discretion.87 The primary concerns of those who oppose
remedial constructive trusts are that they contravene the principles of
insolvency law, they violate the rule of law by allowing courts to create
proprietary rights, and they create uncertainty in the law.88
(c) Proprietary remedies in Australia
The institutional/remedial dichotomy is puzzling to an Australian lawyer.
As was recognised by Deane J. in Muchinski v Dodds, institutional
constructive trusts derive that status simply through repeated judicial
recognition; that is, all recognised trusts began life as remedial responses
to particular instances of equitable wrongdoing and became institutional
through repeated usage.89 There will always be some element of discretion
involved in recognising a constructive trust because such trusts, unlike
express and resulting trusts, are not referable to the parties intentions
and depend for their enforcement wholly upon the courts recognition.90
Furthermore, although in a developing category of law greater judicial
discretion will be necessary to determine whether the remedy is warranted,
it is a constrained discretion; that is, the principles for its exercise can
be worked out. Whilst some categories of constructive trust are wellestablished and require very little discretion on the courts part, others are
still evolving. Thus, in Australia the notion that a legitimate constructive
trust involves no element of discretion has been rejected; and, furthermore,
the institutional/remedial distinction is seen as a connoting a remedial
spectrum rather than a remedial dichotomy.
In Australia, proprietary remedies for breach of fiduciary duty are
available at the courts discretion91 ; and, as noted above, the constructive
trust and equitable lien have also been awarded for dishonest assistance.92
86 Re Polly Peck International Plc (No.2) [1998] 3 All E.R. 812 (dishonest assistance claim). But
see Westdeutsche Landesbank Girozentrale v Islington LBC [1996] A.C. 669 at 714, per Lord BrowneWilkinson.
87 Re Polly Peck International Plc (No.2) fn.86 above, at 830, per Nourse L.J.
88 Re Polly Peck International Plc (No.2) fn.86 above, at 830, per Nourse L.J. See also Jensen, The
Rights and Wrongs of Discretionary Remedialism (2003) Singapore J. Legal Studies 178.
89 (1985) 160 C.L.R. 583.
90 See also Grantham, Doctrinal Bases for the Recognition of Proprietary Rights (1996) 16 O.J.L.S.
561.
91 See, e.g. Chan v Zachariah (1984) 154 C.L.R. 178; Hospital Products Ltd v United States Surgical
Corp (1984) 156 C.L.R. 41 at 107110, per Mason J. Meagher, Heydon and Leeming, fn.62 above, paras
5-2505-255.
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On the other hand, in one of its recent references to dishonest assistance

liability, the Australian High Court appeared to suggest that the remedy
is not proprietary: Rather there is the imposition of a personal liability
to account in the same manner as that of an express trustee.93 When
this passage is read in context, however, it seems that the court was
emphasising that the language of constructive trusteeship applies to
dishonest assistance liability regardless of whether any trust property is
involved. With respect, this obiter dictum was not directed to the separate
question of whether later acquired property may be impressed with a trust
or lien.
The case for the Australian approach to proprietary remedies, whilst
attractive, is not yet overwhelming, however, because there is uncertainty
as to how the courts discretion may be exercised in relation to breach of
fiduciary duty and dishonest assistance, albeit that this uncertainty is due
to the evolving nature of the jurisdiction, rather than an unwillingness to
set boundaries to the remedial discretion.94 It is possible to glean from
the current authorities on discretionary proprietary remedies in Australia
the following, possibly overlapping, general principles:
(i) The least intrusive proprietary remedy should be awarded; that
is, the first question is whether, having regard to the issues in
the litigation, there is an appropriate equitable remedy which
falls short of the imposition of a trust.95
(ii) The interests of innocent third parties, including unsecured
creditors, must be protected.96 It is not clear how such exercise
is to be undertaken; although, where such interests are affected,
two options are to refuse a proprietary remedy altogether or to
award only future security.97
(iii) The court always has a residual discretion to withhold the
proprietary remedy on established grounds such as laches.98
International Pty Ltd [1983] 2 N.S.W.L.R. 157 (overturned on appeal on other grounds).
93 Giumelli v Guimelli (1999) 196 C.L.R. 101 at 112, per Gleeson C.J., McHugh, Gummow and
Callinan JJ.
94 See generally, Meagher, Heydon and Leeming, fn.62 above, at para.5-250; Heydon and Leeming,
Jacobs Law of Trusts in Australia, 7th edn (2006), at para.1332.
95 Giumelli v Guimelli (1999) 196 C.L.R. 101 at 113, per Gleeson C.J., McHugh, Gummow and
Callinan JJ. See also Bathurst City Council v PWC Properties Pty Ltd (1998) 195 C.L.R. 566.
96 Muschinski v Dodds (1985) 160 C.L.R. 583; Guimelli v Guimelli (1999) 196 C.L.R. 101 at 113114,
per Gleeson C.J., McHugh, Gummow and Callinan JJ.
International Pty Ltd [1983] 2 N.S.W.L.R. 157 (overturned on appeal on other grounds); Muschinski v
Dodds (1985) 160 C.L.R. 583 at 623, per Deane J.; Warman v Dwyer (1995) 182 C.L.R. 544.
98 See, e.g. Chan v Zacharia (1984) 154 C.L.R. 178 at 204205, per Deane J. referring to other
doctrines of equity such as laches and equitable estoppel; Warman International Ltd v Dwyer (1995)
182 C.L.R. 544 at 559, per Mason C.J., Brennan, Deane, Dawson and Gaudron JJ: estoppel, laches,
acquiescence and delay.
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467
With respect, the careful manner in which the Australian High Court has so
far viewed the discretion to award a constructive trust, and the absence of
glaring examples of injustice to third parties consequent on such remedies
being awarded, casts doubt on the claims of some commentators that a
discretionary imposition of proprietary remedies is always and intrinsically
repugnant alike to legal certainty, the sanctity of property and the rule of
law.99 Whilst the lack of certainty, as yet, makes the Australian model
less appealing, it has the virtue of explicitly confronting the normative
questions involved (particularly with respect to Ds insolvency).
A consideration of the Australian law suggests that a constructive trust
may be imposed, and should only be imposed, as a remedy for dishonest
assistance where
(i) A proprietary remedy will be the most effective way to redress
Ds wrongdoing and would not be otherwise available. This
will generally occur where the whole of Ds gain is referable
to Ds dishonest assistance, and either a constructive trust is
the best means of placing C in the position that C would have
been in had Fs breach of duty not occurred; and/or, where a
business opportunity can still be pursued to fruition by C.100
(ii) The proprietary remedy can be framed so as to protect the
interests of third parties.101 This means that if D is insolvent,
or unable to meet his liabilities so that the contest is really
between C and Ds unsecured creditors, a constructive trust
should not be awarded.
Alternatively, even where an account of profits is deemed more suitable,
and so long as condition (ii) can be met, an equitable lien may be imposed
to secure the future payment by D of the account of profits.102
V. CONCLUSION
Although early cases awarding gain-based remedies did not explicitly
distinguish F and Ds liability, dishonest assistance is best seen as a
primary liability based upon Ds exploitation of Cs vulnerability (Model
C). The nature of Ds wrongdoing is distinct from that of F who breaches
an obligation of loyalty. The rationale for dishonest assistance liability has
both pragmatic and principled features; these support the availability of
gain-based remedies as well as loss-based remedies. Thus, neither of the
models for dishonest assistance liability that are currently predominant in
the case law and/or commentaries is satisfactory.
99 Birks, Property and Unjust Enrichment: Categorical Truths [1997] N.Z.L.Rev. 623 at 641 (quoted
with approval in Virgo, Principles of the Law of Restitution (2006), at p.615).
100 See also Goode, Proprietary Restitutionary Claims in Cornish et al., fn.17 above, at p.74.
101 Muschinski v Dodds (1985) C.L.R. 583 at 623, per Deane J.
102 Warman International Ltd v Dwyer (1995) 182 C.L.R. 544.
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In most cases the remedy for dishonest assistance will be equitable

compensation (breach of fiduciary duty most often resulting in loss rather
than gain); however, this does not preclude the court awarding an account
of profits when appropriate. Ds joint and several liability for Cs losses
resulting from Fs breach of duty is compatible with a model of primary
liability if resort is had to the pragmatic rationales for liability; however,
joint and several liability for Fs gains generally is not.
A proprietary remedy for dishonest assistance is justifiable only where
Ds solvency is not in question. The Australian discretionary approach to
awarding proprietary remedies can only be countenanced if it is accepted
that, in equity, courts have a controlled remedial discretion. If this is
accepted then a proprietary remedy may be awarded where it does not
create injustice for innocent third parties and so as to allow C the most
effective remedy. The scenario of Ds dishonest assistance in Fs diversion
of a business opportunity from C shows that a proprietary remedy is
sometimes the most appropriate means of redressing Ds wrongdoing.
The Australian cases suggest a way forward in this regard.
PAULINE RIDGE.*
* Australian National University. I thank Jane Stapleton, Peter Cane, Joachim Dietrich and Michael
Bryan for their constructive criticism of earlier drafts. A version of this article was presented at the
Obligations III conference, Brisbane, July 2006.
Australia; Breach of duty of care; Dishonest assistance; Joint and several liability; Proprietary
rights; Remedies; Third party acts
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SOMETHING OLD, SOMETHING NEW, SOMETHING

BORROWED: AN ANALYSIS OF THE NEW
DERIVATIVE ACTION UNDER THE COMPANIES
ACT 2006
I. INTRODUCTION
THE statutory derivative action, which replaced the common law action
from October 1, 2007,1 has been amongst the most publicised and debated
reforms introduced by the Companies Act 2006 (the Act).2 The aim
behind this innovation, which is largely based upon the recommendations
of the Law Commission, is the simplification and modernisation of the
law in order to improve its accessibility.3 To achieve this, the arcane
rule in Foss v Harbottle, and the concepts of fraud on the minority
and wrongdoer control, have been discarded and replaced by a judicial
discretion to grant permission, which is to be exercised by reference to
statutory criteria set out in ss.261263 of the Act. These reforms have
been controversial, with practitioners voicing fears that they will lead
to increased litigation against directors by activist shareholders.4 This is
because, in a change to the existing law, shareholders can now bring a
derivative action against directors for negligence from which they do not
benefit, as well as for other breaches of duty. Lawyers are concerned that,
when married with the new duty imposed on directors under s.172 of
the Act, which requires directors to promote the success of the company,
this will result in shareholders bringing derivative actions alleging that
directors have negligently failed to have regard to one of the factors in
s.172, or placed undue weight on others.5
However, the real ramifications of the action are unclear. Much depends
upon the approach the courts take to determining whether to grant
1 Department of Trade and Industry Implementation Timetable (issued February 28, 2007).
2 Companies Act 2006 s.260.
3 Law Commission, Shareholder Remedies: Report on a Reference under Section 3(1)(e) of the
Law Commissions Act 1965 (Law Com. No.246, Cm. 3769, 1997), at p.7. There have been some
adjustments to the original recommendationsin England and Wales, for example, the Law Commissions
recommendation that a member be required to give 28 days notice to the company before initiating
proceedings was not adopted: Shareholder Remedies, at p.91.
4 Milner Moore and Lewis, Herbert Smith, In the Line of FireDirectors Duties under the
Companies Act 2006, at p 4, http://www.herbertsmith.com/NR/rdonlyres/B65D78B4-23E8-463E-8D519E893A0705E7/3831/IntheLineofFire.pdf [Accessed April 11, 2008]; Mills and Reeve, Briefing (October
2006), http://www.mills-reeve.com/lawbaseupdates.asp?practicearea=1&industry=&date=all [Accessed
April 11, 2008]; Clifford Chance, The Companies Act 2006 (November 2006), at pp.34.
5 Herbert Smith, In the Line of Fire, at p.3; Norton Rose, Shareholder Rights,
http://www.nortonrose.com/knowledge/publications/2006/pub6097.aspx?page=11332 [Accessed April
11, 2008]; Freshfields Bruckhaus Deringer, Companies Act 2006: Directors Duties (November 2006), at
p.11; Clifford Chance, The Companies Act 2006, p.4.
469
470
[Vol. 124
permission to proceed with the action. If they adopt a restrictive approach,

few actions may survive the application for permission, which must be
sought early, after issue of proceedings. This application for permission
is a two-stage process. First a shareholder must establish a prima facie
case that he should be granted permission, failing which the claim will be
dismissed.6 If he succeeds, the application proceeds to the second stage,
which is contested. Here, the courts have a discretion as to whether to
allow the claim to proceed.7 In exercising this discretion they must take
account of the following: whether the shareholder is acting in good faith;
the importance which a person under a duty to promote the success of the
company would attach to continuing the action; whether the wrong could
be ratified or authorised; whether the company has decided not to bring
a claim; the availability of an alternative remedy; and the views of the
independent members of the company.8
The availability of the derivative action, its utility as a shareholder
remedy, and its potential for abuse, will depend on how courts assess
whether a prima facie case exists, and on how they exercise their
discretion. The aim of this article is to consider how the courts could
approach this task. Because the new action replaces the common law, and
there is a lack of judicial precedent on how the criteria should be applied,
in the first years of the Act, legal representatives and the courts will look
for guidance to potentially relevant pre-existing domestic cases, as well
as to analogous jurisprudence in other Commonwealth jurisdictions. This
article will examine this domestic case law, and focus on Australian case
law dealing with actions under its statutory derivative action process, to
ascertain how these might assist the UK courts to determine the meaning
and operation of the new provisions.
There are two bodies of domestic case law which could be influential.
The first relates to applications for permission to bring a derivative action
at common law, while the second relates to the exercise of judicial
discretion in the context of interim injunction applications. Both required
an applicant to establish a prima facie case, and so may provide an
indication of what a shareholder must do to establish a prima facie
case under the Act, and how easy this will be.9 Again, other criteria
which shareholders had to satisfy in order to obtain permission to bring a
derivative action at common law are very similar to the criteria in the Act.
As a result this case law could well influence the courts interpretation of
the statutory criteria.
6 Companies Act 2006 s.261(2).
7 The company can be directed to file evidence opposing the application: Companies Act 2006 s.261(3).
8 Companies Act 2006 s.263(3) and (4). However permission must be refused if the court considers
that a person under a duty to promote the success of the company would not continue the action, or if
the alleged wrong has been authorised or ratified: Companies Act 2006 s.263(2).
9 There is an alternative test for the grant of an injunction being whether there is a serious question to
be tried: see American Cyanamid v Ethicon Ltd [1975] A.C. 396.
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An Analysis of the New Derivative Action
471
Meanwhile Australia has introduced a statutory derivative action

scheme to replace the common law. The scheme, now found in Part
2F1A of the Corporations Act 2001, was introduced with effect from
March 13, 2000.10 In a number of material respects the provisions in
the Corporations Act 2001 are similar to those in the Act. In particular
a claimant must obtain leave of the court to prosecute an action on the
companys behalf, though this must be obtained prior to the initiation of
proceedings.11 Again, the criteria upon which the court will grant leave,
set out at s.237 of the Corporations Act, bear similarities to the criteria
in the Act. Finally, over the past seven years, the Australian courts have
established a reasonably settled body of rules and principles to guide
them in the exercise of their discretion in leave applications. For these
reasons, Australian cases may constitute useful and persuasive authorities
in relation to how domestic courts might exercise their discretion, and in
relation to certain other matters, such as the impact of the Act on causes
of action which have arisen prior to its coming into effect.
There are, of course, dissimilarities between the Australian and UK
legislation. Unlike the position in the United Kingdom, ratification is not
a bar to a derivative claim.12 In addition, while the Act provides that a
derivative claim can only be brought for a breach of duty by a director,13
the Corporations Act does not imposes any such limitation either on the
cause of action, or the identity of the defendant.14 Again, while only
members of the company can bring a claim in the United Kingdom,
officers, former officers and members of related bodies corporate are
permitted to do so in Australia.15 There is, nevertheless, a sufficient
degree of similarity between the two regimes and, in particular, the criteria
governing the exercise of the courts discretion to grant permission to
warrant a comparative analysis.
The article is organised as follows. Part II deals with some preliminary
objections to a UK/ Australian comparison. Part III provides an overview
of the procedure and criteria for permission at common law, under the
Act and under the relevant provisions of the Australian legislation. Part IV
addresses the critical question of how the courts could interpret the criteria
for the grant of permission in the Act, focusing on the domestic case law
10 The legislation followed many law reform recommendations, including Corporate Law Economic
Reform Program Proposals for Reform, Directors Duties and Corporate Governance, Paper No.3, 1997
and was finally introduced by the Corporate Law Economic Reform Program Act 1999.
11 Corporations Act 2001 s.236. There is an exception when the claimant is seeking to intervene in
proceedings already commenced by the company, when leave can be sought after proceedings have
commenced.
12 Though ratification is a factor which the courts may take into account: Corporations Act 2001
s.239(2).
13 Corporations Act 2001 s.260(2).
14 Though it is more difficult to bring a claim against third partiessee Corporations Act 2001 s.237(3)
and (4).
15 Corporations Act 2001 s.238.
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[Vol. 124
on the common law derivative action, and the relevant Australian case
law. Part V will draw further on the Australian experience to consider
how the courts will deal with some transitional issues. The article will
end by drawing tentative conclusions regarding the likely impact of the
codification of the derivative action and suggest that fears that litigation
against directors in the United Kingdom will increase significantly as a
result of codification, may be misplaced.
II. THE APPROACH OF THE UK
AUSTRALIAN COURTS TO SHAREHOLDER

LITIGATION
AND
A preliminary objection to comparing the Australian and UK positions is

that, despite similarities in the legislative regimes governing the grant of
leave to bring a derivative action, there is reason to doubt that the approach
of the UK courts to interpreting the criteria for the grant of permission will
resemble that of the Australian courts. A number of writers, particularly
Sealy, have described the UK courts as hostile to minority shareholder
litigation.16 In contrast, Australian courts are said to be more shareholder
friendly.17 If this is correct, then it is arguable that the manner in which
the Australian courts exercise their discretion when determining whether
to grant leave could be an unreliable guide to how the UK courts would
carry out the same exercise.
One of Sealys main criticisms was that the courts were too quick
to deny a shareholder standing to sue on the basis that the wrong
which gave rise to the cause of action was a wrong to the company,
rather than a wrong to the shareholder personally.18 The case law on
reflective loss demonstrates that this attitude persists, and continues to
cause shareholders considerable difficulty.19 However, this problem does
not relate to the courts approach to derivative litigation, but rather to
shareholders personal actions.20 Furthermore, while the judicial climate
at the time Sealy made his criticisms did appear hostile to shareholders
16 Sealy, Problems of Standing, Pleading and Proof in Corporate Litigation in Pettet (ed.), Company
Law in Change [1987] C.L.P. 1; Sealy, The Rule in Foss v Harbottle: the Australian Experience
(1989) 10 Co. Law 52; Boyle, Minority Shareholders Remedies (2002), at pp.713. See also Reisberg,
Theoretical Reflections on Derivative Actions in English Law: the Representative Problem (2006) 3
E.C.F.R. 69 at 8182, referring to Sealys research.
17 Ramsay and Saunders, Litigation by Shareholders and Directors: an Empirical Study of the Statutory
Derivative Action (2006) 6 J.C.L.S. 397 at 411412; Sealy, The Rule in Foss v Harbottle (1989) 10
Co. Law 52.
18 Sealy,The Rule in Foss v Harbottle (1989) 10 Co. Law 52 at 54.
19 See, e.g. Gardner v Parker [2004] EWCA Civ 781; [2004] 2 B.C.L.C. 554.
20 However, other problems Sealy identified do still exist, such as shareholders lack of access to
insider information: Sealy, Problems of Standing [1987] C.L.P. 1 at 12. Others, such as the uncertainty
surrounding the meaning of fraud on the minority have been removed by the Act: at 1011.
AND
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473
bringing derivative litigation,21 more recent case law does not seem to
display a similar degree of anti-shareholder bias.
A search for decisions dating from 1994, when a leave requirement
was established in the Rules of Court, until July 2007, shows that, in
derivative action litigation, the courts granted permission, have been
prepared to grant permission, or the derivative action has progressed to
trial with no reported consideration of the permission stage, in 11 cases.22
Two other cases can be read as tolerant of derivative claims. In Lowe
v Fahey, the shareholder was allowed to pursue a derivative claim by
way of a s.459 petition23 while Colin Gwyer & Associates Ltd v London
Wharf (Limehouse) Ltd, involved the trial of a counterclaim which was
a derivative action.24 On the other hand permission was refused in nine
cases.25 Thus, in 59 per cent of cases, the courts were willing to approve
derivative litigation by shareholders, in contrast to 41 per cent in which
permission to bring an action was refused. 26
It is interesting to compare this with the position in Australia. In
Ramsay and Saunders study of 31 leave applications heard in Australia
between March 13, 2000 and February 2006, 61.3 per cent (19 cases)
were successful, whilst 38.7 per cent (12 cases) were not.27 While direct
comparisons cannot be made between their statistics and the figures in
21 See Devlin v Slough Estates Ltd [1983] B.C.L.C. 497; Prudential Assurance Co Ltd v Newman
Industries Ltd [1982] Ch. 204, particularly the Court of Appeals comments at 224; and Smith v Croft
(No.2) [1988] Ch. 114.
22 The cases can be categorised as follows: trials of derivative actions: Longstaff International Ltd
v Evans [2002] EWHC 1563 (Ch); Knight v Frost [1999] 1 B.C.L.C. 364; Gidman v Barron [2003]
EWHC 153 (Ch). Cases pre-trial where leave had been granted: Halle v Trax BW Ltd [2000] B.C.C. 1020;
Qayoumi v Oakhouse Property Holdings Plc [2002] EWHC 2547 (Ch), [2003] 1 B.C.L.C. 352; Oystertec
Plc (Proposed Amendments) v Davidson [2004] EWHC 2225 (Ch), [2005] B.P.I.R. 389 (reference to
leave being granted in previous application); Fansa v Alsibahie [2005] EWHC 271 (Ch). Court prepared
to grant leave but not necessary as company adopted the action: Fayers Legal Services Ltd v Day [2001]
All E.R. (D) 121 (Apr.); Smalley v Bracken Partners Ltd [2003] EWHC 1064 (Ch); [2003] 2 B.C.L.C.
84 at [61][62]. Other: Clark v Cutland [2003] EWCA Civ 810; [2004] 1 W.L.R. 783: derivative action
consolidated with s.459 petition-relief granted in latter; Bates v Microstar Ltd [2003] EWHC 661 (Ch);
(2003) 100(22) L.S.G. 30: shareholder released from undertaking to enable him to bring derivative
proceedings in Jersey.
23 [1996] 1 B.C.L.C. 262. Section 459 was superseded by s.994 on October 1, 2007 when large parts
of the Act were put in force.
24 [2002] EWHC 2748 (Ch); [2003] 2 B.C.L.C. 153.
25 Barrett v Duckett [1995] 1 B.C.L.C. 243; Cooke v Cooke [1997] 2 B.C.L.C. 28; Konamaneni v
Rolls-Royce Industrial Power (India) Ltd [2002] 1 W.L.R. 1269; SMAY Investments Ltd v Sachdev [2003]
EWHC 474 (Ch); [2003] 1 W.L.R. 1973; Portfolios of Distinction Ltd v Laird [2004] EWHC 2071 (Ch);
[2005] B.C.C. 216the case was adjourned but it was clear that the court would not grant permission;
Jafari-Fini v Skillglass Ltd [2005] EWCA Civ 356; [2005] B.C.C. 842; Mumbray v Lapper [2005]
EWHC 1152 (Ch); [2005] B.C.C. 990; Harley Street Capital v Tchigirinsky (No.2) [2005] EWHC 1897
(Ch); [2006] B.C.C. 209; Reeves v Sprecher [2007] EWHC 117 (Ch); [2007] 2 B.C.L.C. 614.
26 The figure of 59% includes Lowe v Fahey [1996] 1 B.C.L.C. 262 and Colin Gwyer & Associates
Ltd v London Wharf (Limehouse) Ltd [2002] EWHC 2748 (Ch); [2003] 2 B.C.L.C. 153. However Airey v
Cordell [2006] EWHC 2728 (Ch); [2007] Bus. L.R. 391 has been omitted. It is difficult to classify. The
judgment was, in many ways, shareholder friendly but the judge adjourned the application to see if the
parties could reach a settlement which protected the shareholders interests. If such a settlement could be
reached he would refuse permission: at 412.
27 Ramsay and Saunders, Litigation by Shareholders and Directors (2006) 6 J.C.L.S. 397 at 423424.
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[Vol. 124
this article,28 it is suggested that there is sufficient data to allow some

tentative conclusions to be drawn. It is clear that shareholders in the United
Kingdom have been much less likely to resort to the derivative action than
Australian shareholders.29 However, when they do, the figures suggest
that they are not significantly less likely than Australian shareholders to
be refused permission to bring the action. It is true that the data could be
interpreted in quite a different way. Given the low number of derivative
actions in the United Kingdom compared to Australia, it cannot be ruled
out that there are a large number of unreported applications for permission,
in which permission has been refused. However, there is some support
from practitioners for the view that this is not the case, and that courts are
more willing to grant permission than to refuse it.30 In the light of this,
it is suggested that the UK courts, at least in the context of derivative
litigation, may not be significantly less shareholder friendly than their
Australian counterparts so as to undermine a comparative analysis.
Boyle argues that the hostility of UK courts towards shareholder
litigants does persist but, importantly, judicial attitudes vary with the size
and nature of the company. While he acknowledges that the derivative
action is used in private companies,31 he argues that the UK courts
demonstrate considerable antipathy towards shareholder litigants in public
companies.32 There has, however, been very little opportunity recently for
judicial attitudes to such litigation to be tested. Since 1994, most derivative
litigation has arisen in small, privately owned, companies. Only three cases
have involved public companies. In one, permission was refused, but the
action was vexatious and a clear abuse of process.33 In another, permission
was granted but the application for permission was unopposed, and the
company, whilst public, was a closely-held family company, the shares
being held in a 50:50 split between two brothers.34 In the third case the
application was adjourned, but again, the company was closely-held.35
Consequently, whilst there are many disincentives to shareholders in
public companies initiating derivative litigation,36 it is not known whether
28 Because of (a) the different time periods involved, (b) the fact that not just leave applications were
counted in this article and (c) the comparison is between the common law position in the UK and the
case law on the statutory derivative action in Australia.
29 The UK searches revealed 23 relevant cases in the period 19942007, whilst in Australia there were
31 leave applications between March 2000 and February 2006.
30 Reed, Derivative Claims: The Application for Permission to Continue (2000) 21 Co. Law 156 at
156157 and 159.
31 Boyle, Minority Shareholders Remedies (2002), at p.24.
32 Boyle at pp.7374. See, e.g. the comments in Prudential Assurance Co Ltd v Newman Industries Ltd
[1982] Ch. 204 at 224225.
33 Harley Street Capital Ltd v Tchigirinsky (No.2) [2005] EWHC 1897 (Ch); [2006] B.C.C. 209.
34 Qayoumi v Oakhouse Property Holdings Plc [2002] EWHC 2547 (Ch); [2003] 1 B.C.L.C. 352.
35 Airey v Cordell [2006] EWHC 2728 (Ch); [2007] Bus. L.R. 391.
36 See overview by Stapledon, Institutional Investors and Corporate Governance (1996), at p.132.
The level of any kind of litigation in public companies in respect of breaches of directors duties has
AND
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475
the courts approach would remain a problem. It is notable, however, that

the Law Commission, whose proposals for reform of the derivative action
were largely adopted by the Government and translated into the Act,
also displayed a hostility to derivative litigation in public companies37
and even in private companies considered that litigation should remain
exceptional.38 It does not seem, therefore, that codifying the action and
drafting the statutory criteria, was intended to encourage greater use of
derivative litigation in public companies.
However, even if the UK courts are more hostile to derivative litigation
in public companies than Australian courts, this would not be fatal
to a comparative study. In Australia, as in the United Kingdom, most
derivative actions are brought in small private companies.39 Consequently,
an analysis of how judicial discretion is exercised in Australia could
usefully be relied upon to indicate how it could be exercised here, at
least in the context of private companies. In relation to public companies,
the position is less clear.
Finally, in so far as the Australian courts do adopt a more shareholderfriendly approach than the UK courts have done in the past, and despite
the Law Commissions position, an examination of the Australian position
is warranted to cast light on how the courts could exercise their discretion
anew in the future. At the very least it reveals that there are no policy
reasons for refusing to follow the example of the Australian courts since,
as the Australian experience demonstrates, adopting a shareholder-friendly
approach causes neither widespread disruption in public companies, nor
does it open the litigation floodgates.
III. AN OVERVIEW OF THE REGULATION OF DERIVATIVE LITIGATION
The common law derivative action developed to provide a remedy for a
company where the company had suffered a wrong but the wrongdoers
were in control of the company, and preventing it from initiating an action
against them in respect of that wrong. In such circumstances, the courts
permitted individual shareholders to bring an action on the companys
behalf. This constituted an exception to the rule that, where a wrong is
done to the company, the company, as a separate legal entity, is the proper
claimant in respect of that wrong. The courts tolerated the exception in
order to do justice to the company.
historically been very low: see Deakin and Hughes, Directors Duties: Empirical Findings (1999), Table
4.
37 fn.3 above, at p.7, fn.25.
38 At para.6.4.
39 Ramsay and Saunders found that 87.1% (27 cases) involved private companies and only 12.9% (4
cases) involved public companies: Litigation by Shareholders and Directors (2006) 6 J.C.L.S. 397 at
420.
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[Vol. 124
However, the courts were wary of vexatious and disruptive litigation

by minority shareholders. Consequently, even if the company had a
good claim against the alleged wrongdoers, an action brought on the
companys behalf by a minority shareholder would not succeed unless
the shareholder could establish standing to sue on the companys behalf.
The rules on standing were restrictive: the shareholder had to bring himself
within the exception to the rule in Foss v Harbottle,40 and demonstrate
that there was a prima facie case on the merits that there had been a
fraud on the minority, which could not be ratified by the shareholders
in general meeting, and also that the company was under wrongdoer
control.41 Furthermore, because the minority shareholders ability to bring
the derivative action has been viewed by the courts as a matter of
grace,42 even if the shareholder managed to satisfy these requirements, he
would still be refused permission if the court took the view that permission
should not be granted to that particular shareholder because of attributes
which were personal to him.43 Thus, the courts would not permit the
shareholder to pursue the action if it was not being brought bona fide, or
there was another remedy available to him. In addition, in a somewhat
controversial development, in Smith v Croft (No.2), Knox J. held that
where an independent majority of the minority shareholders did not wish
a derivative action to proceed, the action would be barred.44
It was not, however, until Prudential Assurance Co Ltd v Newman
Industries Ltd 45 (Prudential ) that it was established that the question
of the shareholders standing to sue had to be settled as a preliminary
matter.46 Then, in 1994, the Rules of Court were amended to require
shareholders to seek leave of the court to pursue a derivative action.47
So, the requirement in the Act for permission to continue an action is not
altogether new. At both common law and under the Act, leave must be
sought early, after issue of the claim form, and before taking any other
step in the proceedings48 although, in contrast to the procedure governing
the common law action, the new procedural rules governing the statutory
action do not set out a time limit within which the application must be
40 (1843) 2 Hare 461; 67 E.R. 189.

41 Prudential Assurance Co Ltd v Newman Industries Ltd [1982] Ch. 204 at 221222
42 Mumbray v Lapper [2005] EWHC 1152 (Ch); [2005] B.C.C. 990 at [2] citing Gower, Modern
Company Law, 4th edn (1979), at p.652.

43 Payne, Clean Hands in Derivative Actions [2002] C.L.J. 76 at 81.
44 Smith v Croft (No.2) [1988] Ch. 114 at 184185.
45 [1982] Ch. 204.
46 At 221
47 RSC Ord.15 r.12A.
48 RSC Ord.15 r.12A which required that the application had to be made within 21 days of intention
to defend being given. This was superseded by CPR r.19.9(3)). The common law procedure is discussed
in Reed, Derivative Claims: The Application for Permission to Continue (2000) 21 Co. Law 156.
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477
issued.49 At common law this had to occur within the time period for
service of the claim form, being within four months of issue of the claim
form for service within the jurisdiction and six months without.50
The statutory derivative action completely replaces the common law.
Shareholders are no longer required to establish either wrongdoer control
or a fraud on the minority. Instead, they must satisfy the courts that the
permission criteria set out in the Act are met. The Act establishes a two
part process for obtaining permission.51 The courts first have to determine
if the claim discloses a prima facie case.52 If it does not then the claim
is dismissed. If it does, then the court may direct what evidence is to be
provided by the company. Whether or not such a direction is given, it
seems that s.263(2) requires a court, once it has determined that there is
a prima facie case for permission, to refuse permission if it is satisfied
that a person under a duty to promote the success of the company would
not continue the action or if the act forming the basis of the claim has
been authorised or ratified.53 If neither of these applies then the court has
a discretion as to whether to allow the claim to proceed. These factors,
set out in s.263(3)(4), will be considered by a court in exercising this
discretion: whether the shareholder is acting in good faith; the importance
which a person under a duty to promote the success of the company
would attach to continuing the action; whether the act could be ratified
or authorised; whether the company has decided not to bring a claim; the
availability of an alternative remedy for the shareholder; and the views of
the independent members of the company in relation to the action.
Although the courts must take these criteria into account when
determining whether to grant permission, these considerations are not
exhaustive and, it seems, the courts can take account of other relevant
considerations.54
In certain respects the criteria for the grant of permission under the Act
have parallels in the common law: in particular the requirement in s.261(2)
that an applicant must, at the first stage of the permission process, establish
a prima facie case that permission should be given; the requirement at the
second stage that the court must consider the applicants good faith; and
the requirement to consider whether an alternative remedy is available to
the applicant.55 In addition, although the common law had no equivalent
49 Redrafted CPR r.19.9 and r.19.9A, which requires that the company be notified of the claim and
application as soon as reasonably practicable after issue of the claim form. http://www.justice.gov.uk/civil/
procrules fin/contents/frontmatter/si update45 preview.pdf [Accessed April 11, 2008]. This came into
effect from October 27, 2007.
50 CPR r.19.9(5); CPR r.7.5.
51 Explanatory Notes to the Companies Act 2006, para.492.
52 Companies Act 2006 s.261(2).
53 Companies Act 2006 s.263(2)
54 This follows from the wording of s.263(3) which states that the court must in particular have
regard to the listed factors. See also Law Commission, Shareholder Remedies, fn.3 above, at para.6.73
55 Companies Act 2006 s.263(3)(a) and (f).
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to s.263(2)(a) or s.263(3)(b), which require courts to consider whether a

person acting in accordance with s.172 (the duty to promote the success
of the company) would continue with the claim, and the importance such
a person would attach to it, nevertheless, in a couple of recent decisions,
the test for the grant of leave at common law has been articulated as
whether an independent board would sanction proceedings.56 It seems at
least arguable that there is sufficient similarity between these tests that the
case law on the latter test could potentially be of use in interpreting the
former.
Turning to the Australian provisions, unlike the UK statutory scheme
the Australian scheme merely provides for one stage to the leave process.
The court must, according to s.237(2) of the Corporations Act, grant leave
if it is satisfied that:
(a) it is probable that the company will not itself bring the
proceedings, or properly take responsibility for them, or for the
steps in them; and
(b) the applicant is acting in good faith; and
(c) it is in the best interests of the company that the applicant be
granted leave; and
(d) if the applicant is applying for leave to bring proceedingsthere
is a serious question to be tried; and
(e) either:
(i) at least 14 days before making the application, the applicant
gave written notice to the company of the intention to apply
for leave and of the reasons for applying; or
(ii) it is appropriate to grant leave even though subparagraph (i)
is not satisfied.
We should mention that in Australia direct claims are allowed against third
parties but it is more difficult to obtain permission in these cases than in
cases against directors because of a rebuttable presumption that granting
leave would not be in the companys interests where the directors, acting
in good faith and rationally, have decided not to allow the company to
pursue the action.
The plaintiff has the onus of establishing a case for leave to be granted
under s.237,57 and he must establish all of the criteria mentioned.58 There
is no special standard of proof that is required.59 While the legislation
does not state that courts must not grant leave if any of the prescribed
conditions are not satisfied, it has been held that the legislation effectively
56 Mumbray v Lapper [2005] EWHC 1152 (Ch), [2005] B.C.C. 990; Airey v Cordell [2006] EWHC
2728 (Ch); [2007] Bus. L.R. 391 at [56].
57 Jeans v Deangrove Pty Ltd [2001] NSWSC 84 at [10].
58 Talisman Technologies Inc v Qld Electronic Switching Pty Ltd [2001] QSC 324.
59 Fiduciary Consultants Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442 at [15].
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requires that result.60 Also, it has been held that, in contrast to the position
in the United Kingdom, if the prescribed conditions are satisfied the court
has no discretion and must give leave.61 It follows that the court cannot
entertain any other criteria besides the five that are listed in s.237(2).62
There are several points of similarity between the UK and Australian
provisions, and these are matters on which we will focus in the next two
parts of the article, together with the common law principles. Importantly,
in both jurisdictions the court must be convinced that the applicant for
permission is acting in good faith. A second point is that both the UK and
Australian legislation abolish the right to bring derivative proceedings at
common law. Another comparative point that is raised in Part IV is the
fact that the Australian provisions state that the courts must decide that
it is in the best interests of the company that leave be granted, and while
the UK legislation does not have an explicit requirement in that regard,
the courts are to take into account the importance that a person acting
under s.172 of the Act would attach to continuing the claim. This latter
requirement will, it is submitted, involve consideration of what is in the
interests of the company.
To summarise, it seems clear that, as a result of the similarities in the
common law and Australian leave criteria on the one hand, and the new
statutory derivative action provisions on the other, the former will be of
assistance in interpreting the latter and, in particular, the following: the
meaning of a prima facie case; the good faith of the applicant; when an
alternative remedy will be deemed preferable; and how the courts could
approach the task of assessing what view a person under a duty to promote
the success of the company would take of the action. The next Part will
now examine in detail the common law and Australian case law relevant
to each of these criteria, with a view to identifying how the courts might
apply these criteria and exercise their discretion under the Act.
IV. THE CRITERIA FOR DETERMINING WHETHER TO GRANT PERMISSION
Perhaps the first thing to note is that it seems that there are two
problems that beset a hearing for permission, both of which mirror those
applying in applications for interim injunctions.63 First, there is usually
60 Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 A.C.S.R. 534 at
[27]; Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [12].
61 Charlton v Baber [2003] NSWSC 745; (2003) 47 A.C.S.R. 31 at [31]; Isak Constructions (Aust.)
Pty Ltd v Faress [2003] NSWSC 784 at [10]; McLean v Lake Como Venture Pty Ltd [2003] QCA 562 at
[2]; Carpenter v Pioneer Park Pty Ltd [2004] NSWSC 973; (2004) 186 F.L.R 104; (2004) 211 A.L.R.
457 at [16], [31]; Fiduciary Consultants Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442 at [16];
Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [12].
62 Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [13]; Magafas v
Carantinos [2006] NSWSC 1459 at [8].
63 The equivalent test in Australia is used in deciding interim injunction applications: Charlton v Baber
[2003] NSWSC 745, (2003) 47 A.C.S.R. 31 at [55]; Reale v Duncan Reale Pty Ltd [2005] NSWSC 174
at [11].
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no oral evidence and no opportunity for cross-examination or discovery;

inspection of documents has not taken place; and sometimes no statement
of claim or defence has been served,64 so that the judge does not have
before him, in many instances, the full story or, at least, a tested full story.
Secondly, a judge hearing an application for permission cannot devote the
same time to it as the trial judge can, if and when the case is finally heard
in full. Generally cases will be decided on the documentary evidence
presented to the court, as is the situation usually with interim injunction
applications but, on occasions, in Australia, courts have permitted oral
evidence to be given in leave applications, and they have permitted crossexamination of the applicant.65 However, it must be noted that, in contrast
to applications for interim injunctions, the proceedings for leave are not
interlocutory, but final.66
(a) Prima facie case
Under the Act, the first stage that an applicant has to address is convincing
a court that he has a prima facie case. In requiring the applicant to establish
a prima facie case, the Act is focusing attention on the cause of action.
The prima facie test is familiar to lawyers and was the primary test in
applications for interim injunctions in most cases in the first three-quarters
of the last century,67 and is still invoked in some injunction hearings today.
At common law it was also the case that to be able to proceed with a
derivative action the claimant had to establish a prima facie case as a
preliminary matter.68 The Australian regime adopts a different test, that
of a serious question to be tried. This is also the test used in interim
injunction applications in Australia, and the Australian courts have used
the case law on interim injunctions to guide them in interpreting the
meaning of a serious question to be tried in the context of derivative
actions.
Despite the prima facie case test being well known, the meaning of
the concept is elusive.69 Neither in applications for leave at common law,
nor in injunction applications in the United Kingdom, have the courts
discussed in detail the meaning of the term, nor what exactly an applicant
must do to establish a prima facie case.70 It has been suggested that what is
64 Bean, Injunctions, 5th edn (1991), at p.23.
65 See, e.g. Talisman Technologies Inc v Qld Electronic Switching Pty Ltd [2001] QSC 324 at [24].
66 Swansson v Pratt [2002] NSWSC 583, (2002) 42 A.C.S.R. 313 at [24]; Reale v Duncan Reale Pty
Ltd [2005] NSWSC 174 at [11]; Ehsman v Nucetime International Pty Ltd [2006] NSWSC 887 at [6].
67 See, e.g. Hoffmann-La Roche & Co v Secretary of State for Trade and Industry [1975] A.C. 295
at 338, 360; Cavendish House (Cheltenham) Ltd v Cavendish-Woodhouse Ltd [1970] R.P.C. 284, CA.
Although the test was not applied across the board. In some cases the test was not employed as courts
wanted to retain flexibility. See Hubbard v Vosper [1972] 1 All E.R. 1023.
68 Prudential Assurance Co Ltd v Newman Industries Ltd (No.2) [1982] Ch. 204 at 221.
69 American Cyanamid Co v Ethicon Ltd [1975] A.C. 396 at 404.
70 Gray, Interim Injunctions since American Cyanamid [1981] C.L.J. 307 at 307.
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required is that one can show that one has a substantial chance of success
in the final hearing.71 This suggests that it is inevitable that there is some
consideration of the ultimate merits of the case. Certainly, in injunction
hearings, the application of the test led to a focus on the relative strengths
of the parties cases and, in many instances, meant a virtual trial within
a trial. In order to establish a prima facie case an applicant in injunction
applications had to establish a greater than 50 per cent chance of success.72
Therefore, if the courts adopt the same approach to interpreting a prima
facie case in the context of the statutory derivative action, it appears that,
to get past first base, the applicant would have to pass a stiff test, and
one that is far more difficult than is necessary in those applications for
interim injunctions where the prima facie test is not invoked.
However, the use of the injunction approach can be criticised. The
provision of a strict test might be all well and good for injunctions, but
the applications under consideration here are totally different. The danger
with the prima facie case criterion as applied in interim injunctions is that
it could lead to mini-trials,73 something that the Law Commission in its
Shareholder Remedies report was most concerned to avoid.74 The Law
Commission was concerned that a threshold test on the merits would lead
to fine distinctions being drawn as to whether a particular set of facts fell
on one side of a rigid line or not.75 It favoured the development of a
principled approach that was not tied to a particular rule.76 It is important
that permission applications are not lengthy, and equally important that the
substantive issues are not pre-judged, given the absence of evidence from
the company and the uncontested nature of the first stage, because even if
the judge directs the company to submit evidence, there is no suggestion
that the company will argue the substantive points at this juncture. The
company might wish to keep its powder dry at this point.
The Australian courts have established that the serious question to be
tried criterion only requires the applicant to show a greater than zero
per cent probability of success.77 All that is necessary is that the case
is not frivolous or vexatious,78 and the applicant has a real prospect of
succeeding on his claim.79 At first blush, therefore, in the light of what
has been said about the application of a prima facie test case in interim
71 Heydon and Loughlan, Cases and Materials on Equity and Trusts, 5th edn (1997), at p.978.
73 The Ramsay and Saunders study suggests that the leave criteria did not turn applications into minitrials: Litigation by Shareholders and Directors (2006) 6 J.C.L.S. 397 at 30, 43.
74 fn.3 above, at para.6.71.
75 At para.6.72.
76 At para.6.72.
77 Taylor and Wright, Australian Broadcasting Corporation v Lenah Game Meats (2002) 26
Melbourne U.L.Rev. 707 at fn.144.
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injunctions, it would appear that in requiring an applicant to establish a

prima face case, the UK legislation is demanding something more than
that applying under the Australian legislation, and it places a substantial
obstacle in the way of a UK applicant seeking permission to bring a
derivative action.
On the other hand, the application of a prima facie test in UK
cases involving derivative actions at common law suggests that such a
conclusion may be unwarranted. After all, the prima facie test in the Act
arguably does not involve a fresh approach, given that it was also applied
at common law. Although the common law cases give little guidance on
how to apply the test, in Prudential Assurance Co Ltd v Newman Industries
Ltd (No.2)80 the Court of Appeal indicated that, at the preliminary stage,
the court could not proceed on the basis that everything asserted in the
plaintiffs case was true, but nor should the plaintiff be required to prove
fraud and wrongdoer control.81 The latter comment is important, as it
suggests that, in common law derivative actions, in order to establish a
prima facie case, there is no need for an applicant to show that he has a
more than a 50 per cent chance of success. Therefore, the test of a prima
facie case in common law derivative actions is likely to be less strict than
that which applies in interim injunction applications.82
Furthermore, there is little evidence from the UK case law that the test
has presented a significant obstacle to minority shareholders. The number
of reported judgments on leave applications, and on derivative actions
more generally, is small but, of these, there are few in which a shareholder
has failed to establish a prima facie case. Where leave has been granted, in
three cases the applications were unopposed or the defendants conceded
that there was a prima facie case,83 in two the evidence against the
defendant was strong enough to support an application for summary
judgment, and therefore more than satisfied the threshold test of a prima
80 [1982] Ch. 204.

81 At 219.
82 There is some lack of clarity about this. The Court of Appeal stated that the plaintiff had to establish
a prima facie case both (1) that the company was entitled to the relief claimed, and (2) that the action fell
within the proper boundaries of the exception to the rule in Foss v Harbottle: Prudential Assurance Co
Ltd v Newman Industries Ltd (No.2) [1982] Ch. 204 at 222. However in Smith v Croft (No.2) [1988] Ch.
114 at 159, Knox J. stated that he would approach these questions differently. In relation to the former,
which concerns whether the wrongs alleged occurred, he stated that he would only take a prima facie
view, since this was an issue which would be live at trial, but that he would determine the latter, since his
decision on the issue would be final. This suggests that the burden of proof on the plaintiff with regard
to establishing a prima facie case varied. In relation to the former question the plaintiffs burden of proof
was less than the balance of probabilities, but in relation to the latter the plaintiff had to discharge the
balance of probabilities test. The better view is that the prima facie test was relevant only to the first
question. In relation to the second, the test was on the balance of probabilities, and not a prima facie test.
83 Halle v Trax BW Ltd [2000] B.C.C. 1020 at 1023; Fansa v Alsibahie [2005] EWHC 271 (Ch); Airey
v Cordell [2006] EWHC 2728 (Ch), [2007] Bus. L.R. 391 at [68].
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facie case,84 while yet in others, such as reports of trials of derivative

actions, the grant of leave was referred to only in passing, if at all.85
Even where leave has been refused, a prima facie case on the meritsor
strongerhas frequently been established and the application has failed
for other reasons.86 Again, in the few instances in which shareholders
have failed to establish a prima facie case, this was not the sole reason
for the refusal of leave. One of these was Smith v Croft (No.2) in which
Knox J. found that in the majority of their allegations, the plaintiffs had
not got over the hurdle. The judge was influenced by a report from
the companys auditors, which had been commissioned by the board to
investigate the shareholders complaints, and which concluded that most
of the complaints were unfounded.87 Given this independent third party
expert evidence, it is unsurprising that the shareholder failed to establish a
prima facie case in relation to these allegations. However, there were other
allegations, particularly relating to the provision of financial assistance,
upon which the auditors report had expressed no view.88 In relation to
these Knox J. did accept that a prima facie case was made out, reaching
this conclusion by drawing inferences from undisputed facts.89
Similarly, in Harley Street Capital Ltd v Tchigirinsky (No.2),90 there
was independent third party evidence which refuted the shareholders
allegations. Here the company, on the directions of the court, had commissioned a report by an independent firm of solicitors into the minority
shareholders allegations of wrongdoing. No evidence of wrongdoing was
found and, furthermore, the shareholder was unable to advance evidence
of any.91 For these reasons, and because the shareholder lacked bona fides,
the action was struck out as an abuse of process.92
The point that courts appear not to have expected too much from
applicants is further bolstered by the fact that applicants for permission
have been required to submit only fairly rudimentary evidence to establish
84 Fayers Legal Services Ltd v Day [2001] All E.R. (D) 121 (Apr.) at [4]; Bracken Partners Ltd v
Gutteridge [2003] EWHC 1064 (Ch); [2003] 2 B.C.L.C. 84.
85 Knight v Frost [1999] 1 B.C.L.C. 364; Qayoumi v Oakhouse Property Holdings Plc [2002] EWHC
2547 (Ch); [2003] 1 B.C.L.C. 352; Gidman v Barron [2003] EWHC 153 (Ch); Fraser v Oystertec Plc
[2003] EWHC 2787 (Ch); [2004] B.C.C. 233 at [20] (summary judgment application), though in a
subsequent application to amend the companys claim, the court considered that permission should be
withdrawn as there no longer appeared to be wrongdoer control and the company had succeeded on much
of its claim: Fraser v Oystertec Plc (Proposed Amendments) [2004] EWHC 2225 (Ch); [2005] B.P.I.R.
389 at [32][33].
86 Barrett v Duckett [1995] B.C.C. 362 at 364; Portfolios of Distinction Ltd v Laird [2004] EWHC
2071 (Ch); [2005] B.C.C. 216 at [64]; Mumbray v Lapper [2005] EWHC 1152 (Ch); [2005] B.C.C. 990
at [21][24].
87 [1988] Ch. 114 at 150154. Jafari-Fini v Skillglass [2005] EWCA Civ 356; [2005] B.C.C. 842 may
be another such case, though this was not the expressed reason for the refusal of leave.
88 At 153154.
89 At 148 and 165. See also the judges comments at 163164.
90 [2005] EWHC 1897 (Ch); [2006] B.C.C. 209.
91 At [116][118].
92 At [141].
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a prima facie case. Reed has argued93 that CPR Part 19, r.9(4), which
provided, in relation to the common law system, that the claimant needed
only to support the application for permission with written evidence, has
meant that in practice this supporting evidence has done little more than
verify the facts on which the claim and the entitlement to sue on behalf
of the company are based. Under the Act the first stage is decided on
the basis of the applicants written evidence only, (though the applicant
can request an oral hearing if the application is initially unsuccessful),94
and this suggests that the courts could adopt a similarly undemanding
approach to weighing that evidence and assessing whether there is a prima
facie case. Perhaps all that the courts will require is for the applicant
to demonstrate: a credible case95 ; a substantive claim; a genuine triable
issue96 ; or that his case is worthy of being heard in full.
In summary, the need to show a prima facie case on the merits seems
to have been a low hurdle for shareholders to meet at common law.
They have only failed where there has been independent expert evidence
refuting their allegations or when the allegations have been wholly
unsubstantiated. If the courts adopt a similar approach to permission
applications under the Act then, assuming that the shareholder is not
advancing a clearly bogus claim, it is likely that it will be reasonably
easy to establish a prima facie case and progress to the second stage
of the permission process.97 This is because, at the initial stage, the
company plays no part, and the application is assessed on the basis of
the shareholders evidence alone. Therefore, at this point, there will be
no independent evidence available to the court to rebut the shareholders
claims. With regard to the need for the courts to give guidance on how
to assess whether a shareholder has met this criterion, the under-reasoned
common law derivative action cases are of little assistance. But because
there does not appear to be any sign that courts have regarded the prima
facie test at common law as stricter than the Australian serious case to
be tried test, it is suggested that it is to the Australian decisions that
courts and litigants could usefully look for guidance, rather than the UK
case law on interim injunctions. The prima facie test in the context of
interim injunctions is more onerous than that which seems to have been
applied in the common law derivative action, and if that were applied
then it could lead to courts drawing fine distinctions regarding whether
93 Reed, Derivative Claims: The Application for Permission to Continue (2000) 21 Co. Law 156 at
156.
94 Redrafted CPR r.19.9A(10).
95 We are indebted to this suggestion made by Professor Prentice.
96 This is employed in cases where a statutory demand has been served on an alleged debtor and the
alleged debtor claims to have a cross-demand against the creditor serving the demand. See Ashworth v
Newnote Ltd [2007] EWCA Civ 793; [2007] B.P.I.R. 1012.
97 As practitioners have predicted: Palmer and Milner Moore (Herbert Smith), Derivative Actions: a
Step too Far? March 2006 Plc Magazine 1.
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a prima facie case was made out or not, something which, as noted, the
Law Commission wanted to avoid, and which the Australian courts, in
applying the test of serious question to be tried, have been at pains to
prevent.98
(b) Good faith
TURNING, then, to the second stage of the application process, the first
factor which courts must consider is the requirement of good faith. This
has been criticised as a rhetorical device that is replete with uncertainty
in conception and highly unworkable in practice.99 Nevertheless, the
courts are likely to derive some guidance from recent cases which have
addressed themselves to the requirement at common law.100 Besides these
cases, Payne,101 writing well before the drafting of the Act, suggested
that cases applying the clean hands doctrine102 could also be treated as
relevant to interpreting good faith. Under the old system in the United
Kingdom, if a shareholder did not have clean hands, applicants would
be denied permission to bring a derivative claim on the grounds that it
would be inequitable to allow them to succeed in the action.103 Payne was
of the opinion that it is likely that the same approach will be employed
under a statutory derivative action, on the basis that the requirement that
the applicant was acting in good faith would mean that any bad faith
that the applicant exhibited would disqualify him.104 It will be interesting
to see whether the courts continue to apply that approach as a bar to
an applicant obtaining permission, or whether, with the new dispensation,
they will adopt a different view. Of note is the fact that the courts have not
disqualified applications under s.459 of the Companies Act 1985 on this
basis,105 and they might feel that they should not discriminate between
how the provisions are interpreted. On the other hand, it might be argued
that, with small family companies, there could be some justification for
a continuation of the former approach of the UK courts, and unless the
concept is interpreted too broadly, it could be a useful factor to ensure
that unjustified claims are not brought. Payne, however, argues that the
application of the clean hands doctrine is misconceivedthe fact that an
applicant has not acted with all propriety should not end up penalising
98 Ramsay and Saunders, Litigation by Shareholders and Directors (2006) 6 J.C.L.S. 397 at 41.
99 Reisberg, Theoretical Reflections on Derivative Actions (2006) 3 E.C.F.R. 69 at 101 and 103.
100 Portfolios of Distinction Ltd v Laird [2004] EWHC 2071 (Ch); [2005] B.C.C. 216 at [63]; Harley
Street Capital Ltd v Tchigirinsky (No.2) [2005] EWHC 1897 (Ch); [2006] B.C.C. 209 at [134][141].
101 Payne, Clean Hands in Derivative Actions [2002] C.L.J. 76.
102 This is a well-established equitable concept and means that a person has acted, in the eyes of equity,
in such a way that it is unjust that a claim brought at his behest is successful. See Nurcombe v Nurcombe
[1985] 1 W.L.R. 370, CA.
103 e.g. Towers v African Tug Co [1904] 1 Ch. 558; Nurcombe v Nurcombe [1985] 1 W.L.R. 370, CA.
104 Payne, Clean Hands in Derivative Actions [2002] C.L.J. 76 at 80.
105 See, e.g. Re London School of Electronics Ltd [1986] Ch. 211.
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the company and protecting those against whom proceedings should

be broughtand she maintains that the case law which is relied upon
as evidencing the application of the clean hands doctrine in derivative
litigation can be explained on other grounds.106
Payne places the common law cases into two categories. The first
is where the courts have been concerned to prevent the abuse of the
derivative action jurisdiction.107 Here, relief will be denied because the
shareholder is not the appropriate person to bring the action on the
companys behalf. Examples include where the shareholder has brought
the action for a collateral purpose, rather than to achieve justice for the
company, or where the shareholder has been involved in the commission
of the wrong (as opposed to only benefiting from it). Recent illustrations
include Portfolios of Distinction Ltd v Laird,108 in which the minority
were alleged to have participated in the wrongdoing and benefited from
it, and had a collateral purpose in bringing the action, namely to deflect
attention away from their own wrongdoing, and Konamaneni v RollsRoyce Industrial Power (India) Ltd 109 where there was evidence that
the litigation was being used as a tactic in a struggle for control of
the company.110 Denying relief in these circumstances seems relatively
unproblematic. In Australia, also, the courts will consider whether the
applicant is seeking to act in a derivative capacity for such a collateral
purpose as will amount to an abuse of process.111 The courts are permitted
to determine whether applicants are complicit in the matters about which
they are complaining and examine whether the application really is about
the applicant pursuing private interests rather than the interests of the
company.112 If the applicant has a collateral purpose, that is, the derivative
claim is to achieve some private aims and the objective is to obtain some
advantage for which the action was not designed,113 such as forcing the
defendant to buy his shares, then he cannot be said to be acting in good
106 Payne, Clean Hands in Derivative Actions [2002] C.L.J. 76 at 77, 80.
107 At 8183.
108 [2004] EWHC 2071 (Ch); [2005] B.C.C. 216.
109 [2002] 1 W.L.R. 1269.
110 Portfolios of Distinction Ltd v Laird [2004] EWHC 2071 (Ch); [2005] B.C.C. 216 at [30][31], [63];
See also Re Portfolios of Distinction Ltd [2006] EWHC 782 (Ch); [2006] 2 B.C.L.C. 261 at [48][51];
Konamaneni v Rolls-Royce Industrial Power (India) Ltd [2002] 1 W.L.R. 1269 at [136][139].
111 Swansson v Pratt [2002] NSWSC 583; (2002) 42 A.C.S.R. 313 at [36]; Maher v Honeysett &
Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [30]; Ehsman v Nucetime International Pty
Ltd [2006] NSWSC 887 at [49]; Magafas v Carantinos [2006] NSWSC 1459 at [17].
112 Austin, Ford and Ramsay, Company Directors (2005), at p.753.
113 Swansson v Pratt [2002] NSWSC 583, (2002) 42 A.C.S.R. 313 at [37]; Cannon Street Pty Ltd v
Karediss [2004] QSC 104 at [165].
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faith,114 because, on the basis of equity,115 the application should not be

granted even if the company might benefit from it.116
The UK case of Barrett v Duckett 117 is more difficult, however. Here
permission was denied in part because the shareholder had a collateral
purpose in bringing the action, namely the litigation formed part of
a personal vendetta. This is problematic because, as the first instance
judge commented, if ill-feeling disqualified a shareholder from bringing
a derivative action, most derivative claims would be frustrated.118 Such
considerations have led the Australian courts to reject arguments that
the good faith requirement will not be satisfied where the applicant is
motivated by intense personal hostility or malice. As Palmer J. stated in
Swansson v Pratt, it is not the law that only a plaintiff who feels goodwill
towards a defendant is entitled to sue, though he did agree that where
the sole purpose of the action was a private vendetta, good faith would
not be present.119 However, distinguishing between an action motivated
by malice and one motivated by a personal vendetta is surely a difficult
task.
It is suggested that an alternative interpretation of Barrett v Duckett is
preferable. As the Australian courts have found, the issue of whether the
shareholder is acting in good faith on the companys behalf is closely
connected with whether the action is, in fact, in the interests of the
company.120 Thus in Barrett v Duckett itself, the courts conclusion that
Mrs Barrett was not litigating bona fide on the companys behalf was not
based simply on evidence of her personal vendetta against the defendant.
Rather, it was because she was conducting litigation in a manner which
failed to advance or protect the companys interests. In particular she
had failed to sue her daughter who was also involved in the wrongdoing,
and she had initiated the litigation even though there was little hope of
recovery for the company.121 In the light of this, it is suggested that it is
not necessary, nor is it desirable, for this case law to be interpreted in a
114 Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640, (2002) 42 A.C.S.R. 534
at 56. But it is not necessarily acting in bad faith if the applicant even admits to bearing malice to the
respondent: Swansson v Pratt [2002] NSWSC 583, (2002) 42 A.C.S.R. 313.
115 Fiduciary Consultants Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442 at [31].
116 Austin, Ford and Ramsay, Company Directors (2005), at p.754.
117 [1995] B.C.C. 362.
118 Barrett v Duckett [1995] B.C.C. 362 at 372.
119 Swansson v Pratt [2002] NSWSC 583; (2002) 42 A.C.S.R. 313 at [41]. See also Lewis v Nortex
Pty Ltd (in liq.) [2006] NSWSC 768 at [3][6].
120 See below, text to fnn.133137.
121 [1995] B.C.C. 362 at 372373. The court was also influenced by the fact that she had failed to
resort to her most obvious remedy being s.459, and had only commenced the action after the defendant
had attempted to put the company into liquidation: at 370. Furthermore, a preferable alternative remedy
was available in the form of winding up: at 372. Reisberg also treats this case as one in which relief was
denied as litigation was not in the companys interests: Theoretical Reflections on Derivative Actions
(2006) E.C.F.R. 69 at 105. See also Payne, Clean Hands in Derivative Actions [2002] C.L.J. 76 at
82.
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manner which would deny permission to a shareholder to bring an action

simply because there was a high level of personal hostility between the
parties. Rather, in such circumstances, the court should consider closely
whether s.263(3)(b) is satisfied, that is whether a person under a duty to
promote the success of the company would support the action. If this, and
other, criteria are satisfied, it is difficult to see why litigation, which might
otherwise be in the companys interests, should be barred because it also
serves the shareholders private purposes.122 When recommending the
need for courts to consider the issue of good faith, the Law Commission
also did not think that the fact that an applicant had some interest in
the outcome of the derivative claim, would prevent him or her being
granted leave.123 On the other hand, where the shareholders collateral
purpose gives rise to a conflict of interest between the shareholder and
the company, permission should be refused, either because the shareholder
lacks good faith or because s.263(3)(b) is not satisfied. This approach
would block actions pursued by a competitor of a company in order, for
example, to gain access to confidential corporate information through the
disclosure process, or to otherwise disrupt the companys business.124
Paynes second category of common law cases comprises those
decisions in which, even though the shareholder was not complicit in
the wrongdoing, and had no collateral purpose in bringing the litigation,
the courts have, nevertheless, denied the shareholder a remedy because
the shareholder benefited from the wrongdoing. Payne argues such
cases should be interpreted as situations where the minority is, in the
circumstances, estopped from suing the majority, rather than as an
illustration of clean hands.125
It is unclear whether the courts will interpret the good faith requirement
in the Act to deny standing to a shareholder who falls within this category,
but Paynes criticism of the unthinking application of clean hands in
these cases is convincing.126 It is suggested, therefore, that the UK courts,
rather than following the common law on this point, could look to the lead
provided by the Australian courts which have taken the view that they are
not to examine whether the applicant has clean hands, nor that there are
matters that are prejudicial to the credit of the applicant.127
122 See, e.g. the Australian case of Lewis v Nortex Pty Ltd (in liq.) [2006] NSWSC 768 at [3][6].
123 Above fn.3 at paras. 6.76.
124 See Harley Street Capital Ltd v Tchigirinski (No.2) [2005] EWHC 2471 (Ch); [2006] B.C.C. 209 at
[68] and (costs judgment) [5].
125 Payne, Clean Hands in Derivative Actions [2002] C.L.J. 76 at 85. Cases of this nature include:
Towers v African Tug Co [1904] 1 Ch. 558; Nurcombe v Nurcombe [1985] 1 W.L.R. 370. See also
Konamaneni v Rolls-Royce Industrial Power (India) Ltd [2002] 1 W.L.R. 1269 at 152; Portfolios of
Distinction Ltd v Laird [2004] EWHC 2071 (Ch); [2005] B.C.C. 216 at 63 and Mumbray v Lapper
[2005] EWHC 1152 (Ch); [2005] B.C.C. 990 at [21], though in all three the shareholders were also
alleged to have participated in the wrongdoing and so would fall within the first category also.
126 Payne, Clean Hands in Derivative Actions [2002] C.L.J. 76 at 8385
127 Magafas v Carantinos [2006] NSWSC 1459 at [23].
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The approach of the Australian courts to the good faith requirement is

helpful in other respects. Although they have allowed cross-examination
of the applicant in order to determine whether he or she was acting
in good faith,128 it seems that good faith can be established on quite
low evidence,129 and in fact the indication from the New South Wales
Supreme Court in Braga v Braga Consolidated Pty Ltd 130 was that the
applicant will be regarded as acting in good faith, and the application will
be allowed, if there is no reason to think, or an inference to be drawn,
that the applicant is not acting in good faith.131 In determining whether an
applicant is or is not acting in good faith, it has become settled that two
questions have to be considered, namely: whether the applicant honestly
believes that a good cause of action exists and has reasonable prospects
of success; and, as we have seen, whether the applicant is seeking to act
in a derivative capacity for such a collateral purpose as will amount to
an abuse of process. Interestingly, Brereton J. of the New South Wales
Supreme Court in Maher v Honeysett & Maher Electrical Contractors Pty
Ltd,132 after approving of the two questions, was of the view that he did
not think that it was necessary for a court to find any particular means by
which the applicants belief that a good cause of action and reasonable
prospects of success exist could be established, because applicants rarely
will know whether a good cause of action does exist; they will ordinarily
rely on the advice of lawyers in this respect.
Again, in Australia, besides requiring the applicant to be acting in
good faith, which is all about the subjective motivation of the applicant,
applicants must also convince a court that the granting of leave is in
the best interests of the company, an objective test.133 Notwithstanding
this difference in tests, it has been said that the outcome of the latter
consideration might well assist in the determination of whether the
applicant is acting in good faith.134 So, it is not just a matter of the
courts taking the assertion of applicants as to their belief as proof of
good faith. For if no reasonable person in the circumstances would have
held the belief that the applicant purports to hold, the applicant may
well be disbelieved.135 The courts take this view because in many cases
the assertion of the applicant will be an unqualified opinion founded on
128 Talisman Technologies Inc v Qld Electronic Switching Pty Ltd [2001] QSC 324 at [24].
129 See, e.g. Lakshman v Law Image Pty Ltd [2002] NSWSC 888 at [23].
130 [2002] NSWSC 603 at [6].
131 This appears to have been the general approach of the Australian courts. See, e.g. BL & GY
International Co Ltd v Hypec Electronics Pty Ltd [2001] NSWSC 705, (2001) 164 F.L.R. 268 at [89].
See also Ramsay and Saunders, Litigation by Shareholders and Directors (2006) 6 J.C.L.S. 397 at 36.
132 [2005] NSWSC 859 at [33].
135 Swansson v Pratt [2002] NSWSC 583; (2002) 42 A.C.S.R. 313 at [36]; Magafas v Carantinos
[2006] NSWSC 1459 at [19].
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hearsay and therefore has little weight or utility. Hence, the objective
facts are more important.136 It has been said that if there is no evidence
to support the applicants case the court will infer that there was no honest
belief, and hence no good faith.137
This approach is in line with the fact that both the Australian and UK
courts have said, in considering claims made against directors for breach
of their duty to act bona fide in the best interests of the company, that it
was a problem merely having a subjective test for determining whether a
director had breached the duty. As a result, objective considerations were
introduced by courts to supplement the subjective test. In Charterbridge
Corp Ltd v Lloyds Bank Ltd 138 Pennycuick J. said that the court had to
ask whether an intelligent and honest man in the position of a director
of the company involved, could, in the whole of the circumstances,
have reasonably believed that the transaction was for the benefit of
the company.139 It will be interesting to see if UK courts permit any
inferences to be drawn from the conduct of applicants and general
objective circumstances.
Finally, the Australian case law indicates that the onus of proof on
the applicant varies depending on his standing. In Swansson v Pratt 140
Palmer J. indicated that where the applicant is a current shareholder
with more than a token shareholding and the derivative claim is seeking
recovery of property that will increase the value of the applicants shares,
good faith will be relatively easy to establish. For example, in Magafas
v Carantinos,141 where the applicant was a current shareholder in the
company, holding 50 per cent of the shares, and the claim would enhance
the value of the companys shares, the applicant was said to be acting in
good faith. The same goes for a director who is able to show a legitimate
interest in ensuring that the company is well-managed and the action is
to enhance the welfare of the company. A similar approach has been
taken at common law in the United Kingdom. In Harley Street Capital
v Tchigirinsky (No.2),142 for example, the court found that a shareholder
lacked bona fides when the shareholder held less than one per cent of
shares, which it had bought after the alleged wrongdoing had been made
public, and where the shareholder, which was a company, had failed
to explain who its funders were, who was providing instructions to its
lawyers and why it, and those who stood behind it, were interested
136 Magafas v Carantinos [2006] NSWSC 1459 at [19].
137 Carpenter v Pioneer Park Pty Ltd [2004] NSWSC 973; (2004) 186 F.L.R. 104; (2004) 211 A.L.R.
457 at [23].
138 [1970] Ch. 62.
139 [1970] Ch. 62 at 75.
140 [2002] NSWSC 583; (2002) 42 A.C.S.R. 313 at [38]. See also Magafas v Carantinos [2006]
NSWSC 1459 at [18].
141 [2006] NSWSC 1459 at [20].
142 [2005] EWHC 2471 (Ch); [2006] B.C.C. 209.
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in bringing the litigation at all.143 Given the common approach of the

Australian and UK courts to this issue, it seems highly likely that, under
the Act, the courts will scrutinise the bona fides of a shareholder more
carefully where the shareholder has no financial interest in the action either
because, as in Harley Street Capital, the price at which the shareholder
purchased the shares already reflected the markets response to the alleged
wrongdoing144 or where, as in Barrett v Duckett, the company may be
insolvent.145 In such cases the courts are likely to require additional
evidence as to bona fides. Again, under the Act, since it is up to the
shareholder to establish that it satisfies the permission criteria, some
evidence must be led on this point if it is not otherwise obvious from
the facts.
(c) The best interests of the company
The Law Commission in its report on Shareholder Remedies 146 indicated
that a court should take into account the interests of the company in
deciding whether to permit a derivative claim to go ahead.147 However,
the legislation that was subsequently drafted did not refer,148 unlike its
Australian counterpart, to the need for the applicant to establish that
the derivative claim would be in the best interests of the company.
Nevertheless, the UK legislation does instruct the court, in s.263(2)(a), and
s.263(3)(b) to consider the importance that a person acting in accordance
with s.172 (duty to promote the success of the company) would attach
to continuing the claim. The meaning of s.172 has been the subject of
interesting commentary from academics and practitioners,149 and we have
no judicial guidance at present as to the scope and interpretation of the
provision, but clearly the s.172 duty is tied up with the idea of acting in
the best interests of the company, and it is unlikely that a UK court would
grant permission unless it was convinced that the claim would be in the
best interests of the company. Thus, what the Australian courts have said
about the issue is of interest.
The inclusion of the requirement of best interests is a recognition in
Australia that a company might well have reasonable business reasons for
143 [2005] EWHC 2471 (Ch); [2006] B.C.C. 209 at [135][140].
144 See Harley Street Capital Ltd v Tchigirinski (No.2) [2005] EWHC 2471 (Ch); [2006] B.C.C. 209 at
[135].
145 Barrett v Duckett [1995] 1 B.C.C. 362 at 372. See also Konamaneni v Rolls-Royce Industrial Power
(India) Ltd [2002] 1 W.L.R. 1269 at [138].
146 fn.3 above, at paras 6.776.79.
147 However, the Law Commission did not think that the fact that the derivative action was not in the
interests of the company should mean that the court was bound to refuse leave: Shareholder Remedies,
at para.6.80.
148 This was the only criterion recommended by the Law Commission that was not adopted in the
legislation.
149 See, e.g. A. Keay, Enlightened Shareholder Value, the Reform of the Duties of Company Directors
and the Corporate Objective [2006] L.M.C.L.Q. 335.
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not pursuing a cause of action.150 The Australian courts have emphasised

the fact that the requirement is that the claim must be in the best interests
of the company, and an applicant cannot merely establish that the claim
appears to be or is likely to be in the best interests of the company. So the
court is not invited to enter into some form of crystal ball gazingit
must be satisfied on the facts that the action would be in the companys
best interests. To establish this involves an applicant doing more than
making out a prima facie case in this respect.151 It has been held that the
personal qualities of the applicant do not come into play in determining
this condition,152 for the focus is on the company. The applicant is required
to adduce evidence in relation to153 : the character of the company (is it a
small or large company; is it a family company?); the business conducted
by the company, in order to ascertain the effects of the proposed litigation
on the proper conduct of the business; enabling a court to determine
whether the substance of the relief which the applicant is seeking can be
obtained without litigation; and the ability of the respondent to satisfy at
least a substantial part of any order made in favour of the company in the
proposed derivative action.
Whether or not the best interests of the company are fulfilled by
permitting a derivative action is an objective test.154 Although neither
the legislation nor the cases require it,155 it has been argued that this
assessment should involve a cost/benefit analysis.156 The court might want
the following kind of evidence to be adduced: how the proposed litigation
will affect the proper conduct of the companys business; whether the
substance of the relief sought is available by some other means; and the
ability of the defendant to meet, at least, a substantial part of any judgment
made in favour of the company.157
In Australia it has been said that where the company is insolvent, and
even when it is in financial difficulties short of insolvency, the issue of
best interests of the company really involves deciding whether the claim
would be in the interests of the creditors.158 This is consistent with the
fact that the common law in both the United Kingdom and Australia
provides that directors, in discharging their duties to their company, have
150 Explanatory Memorandum to the Corporate Law Economic Reform Program Bill, at para.6.38.
151 Swansson v Pratt [2002] NSWSC 583; (2002) 42 A.C.S.R. 313 at [55][56].
152 Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [46][49].
155 Metyor Inc v Queensland Electronic Switching Pty Ltd [2002] QCA 269; (2002) 42 A.C.S.R. 398
at [19].
156 Prince, Australias Statutory Derivative Action: Using the New Zealand Experience (2000) 18
Company and Securities Law Journal 493 at 504.
158 See, e.g. Charlton v Baber [2003] NSWSC 745, (2003) 47 A.C.S.R. 31 at [53]; Chahwan v Euphoric
Pty Ltd [2006] NSWSC 1002 at [28]; Promaco Conventions Pty Ltd v Dedline Printing Pty Ltd [2007]
FCA 586 at [41].
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to take into account creditors interests when their company is in financial

difficulty.159 UK courts might well consider creditor interests as part of
their assessment, because of the fact that they are required to refuse
permission to continue a derivative claim if a person acting in accordance
with s.172 (duty to promote the success of the company) would not seek
to continue the claim. Section 172 does provide in subs.(3) that the duty
imposed by s.172 has effect subject to any law that requires directors, in
certain circumstances, to consider the interests of creditors. In any event
creditors might well be covered by the s.172 duty, for s.172(1)(c) states
that directors must, when endeavouring to fulfil their duty to promote the
success of the company, have regard to, inter alia, the need to foster the
companys business relationships with suppliers, customers and others.
Creditors might well fall within the others category.160 A court might
take the view that permitting the derivative claim is not in the best interests
of the company (creditors) as the cost of the action might reduce the
amount of money that is available for creditors ultimately.
(d) The views of an independent board
While the Australian cases could assist in identifying the factors which
the UK courts could take into account in interpreting s.263(3)(b), recent
UK decisions raise the possibility that the courts may require very clear
evidence that a person under a duty to promote the success of the
company would not pursue the action, or would not consider it sufficiently
important to pursue, before refusing leave on this basis. To explain,
in Mumbray v Lapper 161 the test for the grant of permission to bring
derivative proceedings was said to be whether an independent board would
sanction the pursuit of the proceedings.162 This seems very similar to the
requirement in s.263(3)(b) of the Act. In Mumbray v Lapper itself the
test was not explored further: permission was refused because alternative
remedies existed, and the shareholder had participated in wrongdoing.163
However, in Airey v Cordell,164 the test was applied in a manner which
159 Liquidator of West Mercia Safetywear v Dodd (1988) 4 B.C.C. 30; Facia Footwear Ltd (in
administration) v Hinchliffe [1998] 1 B.C.L.C. 218; Re Pantone 485 Ltd [2002] 1 B.C.L.C. 266; Gwyer
v London Wharf (Limehouse) Ltd [2002] EWHC 2748 (Ch); [2003] 2 B.C.L.C. 153; Re MDA Investment
Management Ltd [2003] EWHC 2277 (Ch); [2004] B.P.I.R. 75; Kinsela v Russell Kinsela Pty Ltd
(1986) 4 A.C.L.C. 215; (1986) 10 A.C.L.R. 395; Jeffree v NCSC (1989) 7 A.C.L.C. 556; (1989) 15
ACLR 217; Spies v The Queen [2000] HCA 43; (2000) 201 C.L.R. 603. See Keay, Company Directors
Responsibilities to Creditors (2007), at pp.153220.
160 Keay, Section 172(1): An Interpretation and Assessment (2007) 28 Co. Law. 106.
161 [2005] EWHC 1152 (Ch); [2005] B.C.C. 990.
162 [2005] EWHC 1152 (Ch); [2005] B.C.C. 990 at [5]. The test is drawn from earlier case law dealing
with whether the court should order the company to indemnify the shareholders costs: see Wallersteiner
v Moir (No.2) [1975] Q.B. 373 at 404 (Buckley L.J.); Smith v Croft (No.1) [1986] 1 W.L.R. 580 at 590
(Walton J.); Jaybird Group Ltd v Greenwood [1986] B.C.L.C. 319 at 321.
163 [2005] EWHC 1152 (Ch); [2005] B.C.C. 990 at [21][23].
164 [2006] EWHC 2728 (Ch); [2007] Bus. L.R. 391.
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could have significant implications if it were to be adopted by courts

interpreting the Act.
In Airey v Cordell, Warren J. stated that there is a range of reasonable
decisions that a board might make, so that a reasonable board could take
a decision either way. 165 He went on to say that shareholders would fail
this test only if the court took the view that no board acting reasonably
would sanction the action. Provided that the shareholders decision was
one which a reasonable board could take, the court should give permission
to proceed even though another board could reasonably refuse to prosecute
the action.166 This was because it would not be
right to shut out the minority shareholder on the basis of the courts,
perhaps inadequate, assessment of what it would do rather than a test
which is easier to apply, which is whether any reasonable board could
take that decision.167
This approach bears strong similarities to the range of reasonable
responses test which is familiar to employment lawyers. When assessing
a claim for unfair dismissal under s.98(4) of the Employment Rights Act
1996, the tribunal will exonerate an employer if the employers actions
fall within a range of responses which a reasonable employer might have
taken, albeit that the dismissal was a harsh decision falling at the extreme
end of a band of reasonable responses.168 The reason for this approach
is that the courts are reluctant to second guess and set aside management
decisions, but it has been criticised on the basis that employers decisions
will not be overturned unless they exhibit a standard of unreasonableness
which equates to perversity.169
If the courts were to adopt a similar approach when assessing what
a person under a duty to act in accordance with s.172 would do,
it would be relatively easy for shareholders to demonstrate that the
hypothetical decision-maker would sanction the action. It would be rare
that a derivative action was so obviously undesirable that no reasonable
decision-maker acting in the companys interests would sanction it.
However, it is not clear that the adoption of such an approach would
be defensible. While an interventionist approach in dismissal cases would
165 [2006] EWHC 2728 (Ch); [2007] Bus. L.R. 391 at [69].
166 At [75][76].
167 At [75].
168 Iceland Frozen Foods v Jones [1982] I.C.R. 17; Post Office v Liddiard [2001] EWCA Civ 940;
[2001] Emp. L.R. 784. Although the EAT in Beedell v West Ferry Printers Ltd [2000] I.C.R. 1263
at 12781279 stated that this was not a test of perversity, equating it instead with the Bolam test
(Bolam v Friern Hospital Management Committee [1957] 1 W.L.R. 582), which is the standard of care
test in professional negligence cases, this test has also been extensively criticised as causing courts to
adopt an unduly non-interventionist approach, and resulting in very few findings of negligence against
professionals.
169 Freer The Range of Reasonable Responses TestFrom Guidelines to Statute (1998) 27 I.L.J. 335
at 335336.
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lead to the courts interfering in management decisions, and so arguably

justifies the range of reasonable responses test, this is not so in the case
of derivative actions. Here it is the shareholder, not management, whose
decision to sue is under scrutiny. Given that management has presumably
opposed the action, allowing it to proceed would constitute interference
with managements judgment, and the litigation itself could interfere with
the running of the companys business.
On the other hand, the use of such a test under the Act may be more
defensible than its use at common law. This is because it would apply
to only one of the criteria which the courts have to take into account
in determining whether to grant permission. Given that assessing the
importance a person under a duty to promote the success of the company
would attach to the action does involve the courts attempting to form a
view in relation to the commercial wisdom of the litigation, the test would
relieve them of carrying out a task which lies outside their normal role,
and which they are not well equipped to carry out.170 It would require
them to refuse permission on this basis only in the most clear-cut cases,
where, for example, pursuing the action was wholly disproportionate and
cost-ineffective.171 At the same time, applications could continue to be
screened out applying the other permission criteria.
(e) Alternative remedy
At both common law and under the Act the availability of an alternative
remedy is a relevant consideration in determining whether the court
should grant permission,172 but while the Act provides that the court
must consider whether there is an alternative cause of action which the
member could pursue in his own right,173 the common law is broader,
and all remedies are taken into account, including alternative avenues of
redress for the company itself.174 This section of the article focuses on
the case law dealing with the availability of alternative personal remedies,
since this is of most relevance to courts interpreting the Act.
170 Hirt, The Companys Decision to Litigate Against its Directors: Legal Strategies to Deal with the
Board of Directors Conflict of Interest [2005] J.B.L. 159 at 165166 and 195196.
171 Airey v Cordell [2006] EWHC 2728 (Ch); [2007] Bus. L.R. 391 at [69] per Warren J., though
it should be noted that the judge was prepared to refuse leave if a suitable alternative remedy became
available: [2007] Bus. L.R. 391 at [83][86].
172 There has been some lack of clarity regarding the relevance of an alternative remedy: compare
Konamaneni v Rolls-Royce Industrial Power (India) Ltd [2002] 1 W.L.R. 1269 at [29], where Lawrence
Collins J. stated that it was not an independent consideration, with Mumbray v Lapper [2005] EWHC
1152 (Ch); [2005] B.C.C. 990 at [5] in which Robert Reid Q.C. thought it could be an extremely important
factor for the court to take into account.
173 Companies Act 2006 s.263(3)(f).
174 Barrett v Duckett [1995] 1 B.C.L.C. 243 at 372. Again, if the company is in liquidation a derivative
action cannot be brought: Fargro v Godfroy [1986] 1 W.L.R. 1134, though this is probably better explained
as an absence of wrongdoer control.
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In Mumbray v Lapper winding up on the just and equitable ground,175 or

a s.459 petition176 were found to be preferable to a derivative action, and
permission was refused. The petitioner had participated in the wrongdoing,
the company was deadlocked and no longer trading and, if liquidation
was pursued, the liquidator could determine whether to take proceedings
in the companys name against the alleged wrongdoers.177 It does not
seem, though, that the fact that a quasi-partnership is deadlocked can,
alone, lead to permission being refused on the basis that, for example,
winding-up is preferable. There are cases in which permission has been
granted despite the fact that the only two members of a company that
was a quasi-partnership can no longer work together.178 In Mumbray v
Lapper, however, it was significant that the applicant was also an alleged
wrongdoer. It seems that the courts are more likely to prefer alternative
remedies where the applicant lacks good faith.179
In Jafari-Fini v Skillglass Ltd 180 permission to bring a derivative action
was refused because the shareholder had a personal cause of action arising
out of the same facts as gave rise to the derivative claim and, if the
shareholder succeeded in his personal claim he would retake control of
the company and could then cause it to bring proceedings, whereas if he
failed the companys claim also fell away.181 While this approach could
have delayed any recovery to which the company was entitled, in this
case the only asset which could have been recovered was worthless.182
In the circumstances, therefore, the company had nothing to gain from
litigation being brought on its behalf and it was not in its interests for
permission to be given. The Australian courts would probably adopt a
similar approach.183
The recent case of Airey v Cordell is notable because of the broad
interpretation given to the concept of an alternative remedy. The court
held that it included a settlement of the dispute which adequately protected
the shareholders interests.184 The problem with this is that it risks
sanctioning green-mailing, the practice whereby shareholders bring
175 Under Insolvency Act 1986 s.122(1)(g).
176 Under the Companies Act 1985, and now superseded by s.994 of the Companies Act 2006.
177 [2005] EWHC 1152 (Ch); [2005] B.C.C. 990 at [23]. Contrast the Australian case of Kandt Stening
Group Pty Ltd v Stening [2006] NSWSC 307 at [33]: company dormant and had no assets save what was
under dispute in the litigationleave granted.
178 Halle v Trax BW Ltd [2000] B.C.C. 1020; Qayoumi v Oakhouse Property Holdings Plc [2002]
EWHC 2547 (Ch); [2003] 1 B.C.L.C. 352; Fansa v Alsibahie [2005] EWHC 271 (Ch). With the exception
of the company in Halle v Trax, however, it is not clear that the companies in question were deadlocked.
179 Barrett v Duckett [1995] 1 B.C.L.C. 243; Portfolios of Distinction Ltd v Laird [2004] EWHC 2071
(Ch); [2005] B.C.C. 216.
180 [2005] EWCA Civ 356; [2005] B.C.C. 842.
181 At [47], [52].
182 At [25], [52].
183 See, e.g. Swansson v Pratt [2002] NSWSC 583 at [63][69]; Promaco Conventions Pty Ltd v
Dedline Printing Pty Ltd [2007] FCA 586 at [46][52].
184 [2006] EWHC 2728 (Ch); [2007] Bus. L.R. 391 at [84][86].
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derivative actions to pressurise company management to buy their shares

at above market price. It could deprive independent shareholders of a
solvent company, and creditors of an insolvent one, of the benefit of
recovery on the companys behalf. Again, if a shareholder were minded to
accept a share purchase in settlement of the claim, the appropriate course
would be to refuse permission on the basis that s.994 of the Companies Act
2006 provided a preferable remedy. On the other hand, given the facts of
Airey v Cordell itself, the approach may be defensible. The company was
closely-held and solvent, so that the companys interests were comprised
of the interests of the disputing shareholders, and the shareholder wished
to remain in the company, and protect his interest in it.185
V. COMMON LAW PROCEEDINGS AND RETROSPECTIVE EFFECT
In both the United Kingdom and Australia the right to issue derivative
actions under the common law rules that existed prior to the enactment
of the respective statutory derivative action schemes no longer apply.
Section 260(2) of the Act states that a derivative claim can only be
brought under Part 11 or in pursuance of an order of the court in unfair
prejudice proceedings (now s.994 of the Act).186 The respective statutory
provisions were designed to codify common law rules.187 The Australian
regime is even more express than the United Kingdoms, for it is stated in
s.236(3) of the Corporations Act 2001 that the right of a person at general
law to bring, or intervene in, proceedings on behalf of a company is
abolished. This has been interpreted by the Australian courts as displacing
the common law derivative action.188 This is clearly the case where the
cause of action on which the applicant relies occurred after the derivative
claim provisions were put in force. But what about where the cause of
action pre-dated the point when the provisions came into force, but no
action had been taken? In such a situation, should a derivative action be
brought under the common law rules? The Australian case law takes the
view that the legislation will apply.189 The reason given is that the statute
was intended to be remedial, that is ameliorating the problems with the
185 Airey v Cordell [2006] EWHC 2728 (Ch); [2007] Bus. L.R. 391 at [48], [84].
186 This is something recommended by the Law Commission in 1997 as it was of the view that it
would make things confusing if actions could also be brought at common law: Shareholder Remedies,
fn.3 above, at paras 6.516.55.
187 Alcock, Birds and Gale, Companies Act 2006: the New Law (2007), at p.163.
188 Chapman v E-Sports Club Worldwide Ltd [2000] VSC 403; (2000) 35 A.C.S.R. 462; Karam v ANZ
Banking Group Ltd [2000] NSWSC 596; (2000) 34 A.C.S.R. 545; Braga v Braga Consolidated Pty Ltd
[2002] NSWSC 603; Metyor Inc v Queensland Electronic Switching Pty Ltd [2002] QCA 269; (2002) 42
A.C.S.R. 398.
189 Karam v ANZ Banking Group Ltd [2000] NSWSC 596; (2000) 34 A.C.S.R. 545; Advent Investors
Pty Ltd v Goldhirsch [2001] VSC 59; (2001) 37 A.C.S.R. 529; Roach v Winnote Pty Ltd [2001] NSWSC
822; Cadwallader v Bajco Pty Ltd [2001] NSWSC 1193; Swansson v Pratt [2002] NSWSC 583; (2002)
42 A.C.S.R. 313.
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common law situation, and to deny this effect to those whose rights had
accrued before the legislation became enforceable would be to frustrate
the remedial purpose.190 Furthermore, the Victorian Supreme Court made
the point in Advent Investors Pty Ltd v Goldhirsch 191 that the intention
of the legislature was to promote certainty concerning the nature of the
derivative action and to avoid confusion because of divergence of common
law principles vis-`a-vis the statutory provisions.192
The Australian approach does seem to sit well with the fact that the
Law Commissions 1997 report recommended the complete replacement
of the common law procedure with the statutory derivative action on the
basis that if the former co-existed with a statutory scheme, there would
be confusion.193 However, the UK sections were said by the Explanatory
Notes to the Act not to formulate a substantive rule to replace the rule
in Foss v Harbottle, but rather to reflect the recommendation of the
Law Commission that there should be a new derivative procedure with
more modern, flexible and accessible criteria for determining whether a
shareholder can pursue an action.194 Arguably, though, the Notes were
merely pointing out that the statutory scheme introduced a new and
all-encompassing approach to addressing derivative actions. Secondary
legislation appears to support this latter interpretation of the Notes as
para.20(3) of Sch.3 to the Companies Act 2006 (Commencement No.3,
Consequential Amendments, Transitional Provisions and Savings) Order
2007195 indicates, although not as clearly as one would like, that a
derivative claim will only be allowed to proceed as a derivative claim,
where the act complained of occurred before October 1, 2007 (the date of
the commencement of Part 11) if it would have been able to do so under
the law in force immediately before Part 11 was put in force. Hence,
it would seem that where there is a cause of action that could be the
subject of a derivative action, and it occurred before October 1, 2007,
shareholders can only obtain permission to bring proceedings if they meet
the requirements at common law.
A related issue that is of interest is what will happen to derivative
actions commenced prior to the time when the UK provisions were put in
force? This could well be a significant issue, as it was in the early days
following the enactment of the Australian legislation.196 Notwithstanding
the fact that Australian courts have said that the provisions enacting
190 Karam v ANZ Banking Group Ltd [2000] NSWSC 596; (2000) 34 A.C.S.R. 545 at [27].
191 [2001] VSC 59.
192 The Australian courts are required by s.109H of the Corporations Act 2001 to have regard for any
remedial purpose in interpreting the Act.
193 fn.3 above, at paras 6.516.55.
194 At para 6.15 and quoted by the Explanatory Notes at para.491.
195 SI 2007/2194. The Order came into force as far as this matter is concerned on October 1, 2007.
196 It was said to be a difficult question: Shum Yip Properties Ltd v Chatswood Investment and
Development Co Pty Ltd [2002] NSWSC 13; (2002) 40 A.C.S.R. 619 at [17].
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the derivative action process were intended to be remedial, Austin J.

in Cadwallader v Bajco Pty Ltd 197 said that s.236(3) does not prevent
a court from hearing a matter under the common law where proceedings
were commenced before the enactment of the new scheme, for the
subsection has nothing to say about the continuation of proceedings
properly bought at a previous time.198 The UK courts will be compelled
to take the same approach, given para.20(2) of Sch.3 to the Companies Act
2006 (Commencement No.3, Consequential Amendments, Transitional
Provisions and Savings) Order 2007.
VI. CONCLUSION
It has been submitted in this article that the meaning and operation of
the new statutory derivative action provisions will be informed, until
the UK courts develop principles, by both the UK common law and the
cases handed down in Australia on its equivalent statutory procedure. We
take the view in this article that, in the light of this case law, the new
provisions need not be interpreted in a manner which is overly onerous to
applicants seeking permission to proceed with a derivative claim. This is
not necessarily a bad thing for either shareholders or companies. Although
there has been significant consideration as to whether or not the reforms
discussed here will precipitate a wave of US-style actions against directors,
it is not likely that we will see the same phenomenon in the United
Kingdom, for actions in the United States tend to be fostered by lawyers
contingency fees and the absence, in most cases, of orders making the
losing party pay the costs of litigation.199 Furthermore, there have not
been a large numbers of cases in Australia. Ramsay and Saunders found
31 cases up until February 2006. We have found, up to July 1, 2007, eight
more cases. Overall this is not a large number of cases over seven years,
although to have eight cases in the last 18 months suggests something of
an upsurge. Of course, the period of time is too short to base any general
comments on the statistics but, in general, we can say that the number of
cases is not large.
Given that, generally speaking, the UK provisions are narrower than the
Australian legislation it seems possible that even fewer applicants (taking
into account differences in the population) will be given permission to
bring cases in the United Kingdom compared with Australia and if the
197 [2001] NSWSC 1193 at [238].
198 At [238]. Austin J. distinguished Karam on the basis that the claim in Karam, while initially
instituted before the enactment of the new provisions, was not properly constituted and amendment of
the claim was sought post enactment. Austin J. held to the same view subsequently in Shum Yip Properties
Ltd v Chatswood Investment and Development Co Pty Ltd [2002] NSWSC 13; (2002) 40 A.C.S.R. 619
at [18].
199 Beale, Directors Beware (2007) 157 N.L.J. 1033.
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trend in Australia were to apply in the United Kingdom, the concerns of

many that we will see a wave of litigation may be without substance.
On the other hand, while a deluge of cases US-style is arguably both
undesirable and unlikely, if the derivative action is to fulfil its function as
a remedy for doing justice to the company in respect of wrongs committed
against it by those who control it, it is desirable that a respectable number
of actions should be initiated. It is also important that the courts are not
hostile to such actions nor interpret the permission criteria in such an
onerous manner that the efficacy of the derivative action is undermined.
As earlier noted, historically, the courts were accused of displaying a bias
against derivative litigation, emphasising the damage such litigation might
cause whilst disregarding the potential corporate governance benefits
of holding wrongdoing directors to account and of using the action to
articulate norms of corporate behaviour. It is to be hoped, therefore, that
the courts will exploit the opportunity presented by the introduction of the
new statutory derivative action to adopt a more balanced approach. The
Australian case law and recent UK common law decisions provide some
guidance as to how this might be achieved.
ANDREW KEAY.*
JOAN LOUGHREY.**
* Professor of Corporate and Commercial Law, Centre for Business Law and Practice, School of Law,
University of Leeds.
** Senior Lecturer in Law, Centre for Business Law and Practice, School of Law, University of Leeds.
The authors would like to thank Professor Dan Prentice for helpful suggestions on an earlier version of
this article.
Australia; Comparative law; Derivative actions; Discretion; Regulation; Statutory interpretation
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REVIEWS AND NOTICES

Security and Human Rights. Edited by BENJAMIN J. GOOLD and LIORA
LAZARUS. [Oxford: Hart Publishing. 2007. xxxiii + 391 pp. Paperback: 30].
OVER the last year the political rhetoric about security and human rights
has undoubtedly been toned down. Prime Minister Gordon Brown and
his Home Secretary have rightly been congratulated for abandoning their
predecessors tough talk on terror. In the wake of last summers
attempted terror attacks in London and Glasgow, both avoided talk of
Britain being engaged in a war on terror and there was no dangerous
reference to the rules of the game having changed. Sadly, however, the
latest Counter-Terrorism Bill demonstrates that the political willingness
to sacrifice our basic rights and freedoms in the name of greater security
is not a thing of the past, even if the tone and language has changed. The
proposal in the Bill to allow the police to hold suspects without charge
for up to six weeks belies the calm and reasoned tone.
This collection of essays provides a broad range of perspectives
on the debate about security and human rights, covering legal theory,
criminology, criminal law, constitutional law, international law and
international relations. It explodes the over-simplified but prevalent mantra
that Western democracies are faced with a choice between security, on the
one hand, and human rights, on the other. A number of contributors also
examine the dangers of relying on the alternative language of balance.
While critiques of human rights talk will be familiar to many, this book
also discusses the contested nature of security talk. Sandra Fredman,
for example, refuses to stick to the dominant concept of security as
protection against the threat from terrorists. She instead sketches out a
positive right to security which comprises the right to demand from the
state the minimum necessary to fulfil ones capabilities.
Ian Loaders contribution to this volume provides a healthy reminder of
the political and lay vernacular of rights and security, too often overlooked
by liberal academics and human rights campaigners. He reminds us of
the powerful arguments used by political, professional and media actors
to mobilise a populist appeal to the ideal of security, while presenting
rights claims as the concern of the remote special interest groups willing
to play fast and loose with the safety of their citizens (p.27). He examines
why there is such popular appeal in all-too-familiar refrains like nothing
to hide, nothing to fear and no smoke without fire and asks why
there is such popular distaste for human rights. While this might be
uncomfortable reading it does not serve the cause of human rights to close
ones eyes to deeply held worries and anxieties about safety and change,
501
502
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to visceral appetites for fear and to the deep emotional satisfactions to

be obtained from fantasies of absolute security and strong, sovereign
authority.
Benjamin Goold considers how personal privacy has been undermined
in the name of greater security. While the British Government has
never gone as far as outwardly advocating the kind of Total Information
Awareness (TIA) system discussed but ultimately abandoned in the United
States, there is no doubt that huge quantities of personal information
are being collated and shared by public and private bodies. It is now
technologically possible to trawl through these volumes of innocuous
personal data to identify characteristics or tendencies. This kind of data
mining or computerised fishing expedition is no longer the stuff of
science fiction. Today, it is a reality which has even been expressly
recognised in legislation (cf. s.73 of the Serious Crime Act 2007). Goold
explores how these processes can result in the creation of categorical
personal identities which increasingly conflict or compete with peoples
own narrative of themselves. He warns that categorical identities are
increasingly providing the basis for assessments of risk and pre-emptive
measures which, while aimed at greater security, are just as likely to
produce and justify repressive and discriminatory outcomes.
The dangers of taking pre-emptive measures on the basis of a persons
categorical identity or profile are also discussed by Lucia Zedner and
Bernard Harcourt. Zedner considers the move from criminal punishment to
pre-emption, a familiar legislative response to al-Qaida inspired terrorism
which has allowed measures such as control orders to side-step important
criminal fair trial standards. She believes this move to preventive measures
has been facilitated, in part, by an ability to make an actuarial assessment
of future risk. Her fear is that seriously restricting peoples freedoms on
the basis of an assessment of what they appear likely to do in the future
disrespects the notion of the individual as a moral agent who could choose
to remain innocent. Harcourt considers the use of racial profiling as a way
to target limited police resources, a suggestion repeated by disparate voices
in recent years. He highlights the paucity of empirical evidence to support
the view that profiling passengers based on proven security risk is just
smart law enforcement and explains how profiling can, in fact, result in
substitutionthe recruitment of individuals from non-profiled groups or
the use of new types of terror attack immune to profiling.
Harcourts chapter on profiling also questions the tactics used by
human rights defenders such as Libertyshould we be willing to get
our hands dirty by participating in debates about the effectiveness of
such laws or practices or should we remain aloof and merely assert
the importance of rights as trumps? I agree with Harcourts conclusion
that [t]he effectiveness issue is a threshold question: if the measures
are not credibly effective, there is nothing further to discuss (p.76). Of
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course, in practice, it is never quite possible to conduct political or legal

arguments in such a clean and linear fashion. It becomes necessary to
engage simultaneously in a range of arguments about effectiveness, about
the long-term counter-productivity of injustice, about better alternatives
and, importantly, the societal and constitutional reason for the human right
in question.
This final argumentthe why of human rightsis particularly important in the United Kingdom where, unlike in the United States, there is little public or political ownership, understanding and appreciation of human
rights. Outside the confines of the court room, asserting the fact of a human
right is not enough to trump competing claims or interestsespecially
those as compelling as security. It is, therefore, vital to engage in normative arguments about human rights. Andrew Ashworth does just this.
His knowledge and understanding of the practical value of fair trial principles is far more persuasive than, for example, abstract references to
the fact that Art.6 of the European Convention on Human Rights prohibits self-incrimination. Given the constraints of a single short chapter
it might, however, have been more satisfying if he had focused on one
or two aspects of a fair trial in more detail rather than skating over eight
elements of a fair trial in an increasingly cursory way.
In the legislative arena the powerful rhetoric of security has too
often succeeded in undermining basic rights protections with little real
scrutiny. The Prevention of Terrorism Act 2005, for example, was rushed
through Parliament in under two weeks. In this context David Dyzenhaus
fascinating contribution to the volume is particularly welcome. He
propounds the idea of a culture of justification in which the elected
limbs of Government have to earn judicial deference on national security
matters. He argues persuasively that statutes affecting human rights
should be supported by reasons and that Parliament should demand
from the Executive the information needed to enable proper scrutiny. He
acknowledges that this could require institutional change to, for example,
allow security sensitive information to be disclosed in such a way as
to allow parliamentary scrutiny of the nature and extent of the terror
threat.
Kent Roach provides a valuable reminder about why effective scrutiny
of legislative proposals is necessarybad laws have a tendency to
reproduce themselves. He discusses the fads within post 9/11 UN
Security Council resolutions: first, for measures designed to control the
financing of terrorism; then for measures which treat terrorism as a
matter of immigration control; and, most recently, for measures which
seek to regulate terrorist speech. The disturbing parallels in domestic
law are immediately apparent (e.g. Part IV Anti-Terrorism, Crime and
Security Act 2001, the nadir of British counter-terrorism policy and
the controversial glorification of terrorism offence in the Terrorism
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Act 2006). As Roach points out, the United Kingdom has made its
own contribution to the ill-considered counter-terrorism laws reproduced
around the worldpre-charge detention for over a month would be a case
in point.
There can be no doubt about the very real threat to human safety posed
by al-Qaida inspired terrorism. However, as Ken Macdonald Q.C. explains
in his Foreword to this volume: this new form of terrorism carries another
more subtle, perhaps equally pernicious risk: it might encourage a fear
driven and inappropriate response . . . it can tempt us to abandon our
values (pp.vvi). At least to some extent the terrorists have succeeded in
this purpose. The ill-named war on terror has left us with a raft of bad laws
making us less safe and less free. Liora Lazarus, however, highlights a
risk which is, perhaps, even more profound. In one of the most interesting
chapters of the book she considers how the
rhetorical and political appeal of security and rights has within
it a potentially explosive combination, not only to erode the
protections of competing rights such as liberty, but also to undermine
accepted understandings of the foundations of fundamental rights
reasoning.(p.344)
For those of us who believe the founding principles of human rights are
human dignity, equality and respect, we should heed her warning against
the development of a meta-right to security, the ultimate right to trump
all others.
JAGO RUSSELL.*
The Protection of Cultural Property in Armed Conflict. By ROGER OKEEFE.
[Cambridge: Cambridge University Press. 2006. xix + 404 pp.
Hardback: 55].
AMONG the saddest books on this reviewers shelves is a volume of 427
black and white plates, compiled shortly after the Second World War to
commemorate a handful of the thousands of destroyed churches, palaces,
public buildings, and fixtures, casualties all of that terrible war.
One response to such destruction, and to the theft of thousands of
boxcars of movables, was to initiate criminal charges against perpetrators.
Nazi chiefs Goering, Ribbentrop, Frank, Rosenberg, and others were
convicted at the first Nuremberg trial for, among much else, ordering
systematic looting and destruction of public and private collections and
sites. Cultural property offences were also part of the Pohl, RuSHA, and
other Nuremberg trials, as well as cases against Erich Koch (Poland),
Eichmann (Israel) and his aide Karl Rahm (Czechoslovakia). But the
cases contain their own limitation: nearly everyone charged with such
* Legal Policy Officer, Liberty.
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acts also committed mass murder or enslavement. Regardless of what

theorists say about the glory of art or the centrality of cultural production,
charges of looting or destruction were secondary, and sometimes barely
mentioned.
Prosecutions for theft or destruction of cultural property were soon
seen as more a parlour game or moot-court question than a realistic goal.
Even if there were to be prosecutions, where would liability end? Should
German leaders be tried for the Baedecker Raids, or destroying Coventry
Cathedral, the Chopin, Tolstoy, and Pushkin homes and graves, and tens
of thousands of synagogues? Would the same legal theory extend to Allied
commanders for the destruction of Monte Cassino, or Dresden? A statue
to honour Bomber Harris, or a posthumous indictment?
Eschewing such speculations, most victims of Second World War
cultural property violations preferred a second alternative, the tangible
goal of restitution. In the West, French, Italian, and other national
collections were largely returned. In western Germany, procedures were
put in place for restitution to individuals of their real and movable
property, including fine and decorative art, books, and ritual objects.
But evidentiary hurdles were immense for Jewish heirless and communal
property. Some German survivors won restitution, but most Holocaust
victims found avenues blocked by seemingly dispositive legal doctrines
that eased only in the 1990s. By then, the possessors were no longer
original takers or oily middlemen, but purchasers or heirs a few degrees
removed, or museums with no more sense of guilt or duty to a prewar
owner than they felt to an ancient Sumerian. In the East, the USSR began
with a rough policy of reparations-in-kind for cultural and other property,
with trophy commissions selecting objects. Having returned high-visibility
items such as the Pergamon Altar in the 1950s, the Soviets retained most
others, hostages to the Cold War. International and domestic private law
were largely irrelevant, and the claims of not only German state museums
but of despoiled Jews or Polish monasteries found scant sympathy. Only
recently did the situation change: witness Ukraines return of its part of the
Koenigs collection. As for private individuals, few received compensation
for personal loss, never mind lost communal and cultural property, and
for most it is probably decades too late.
Given the difficulties with punishment and restitution, many placed
their hopes on a third option, using law to protect sites and objects. This
endeavour had very old roots, and culminated in the Hague Convention
and two Protocols on Cultural Property (1954 and 1999) and Additional
Geneva Protocols (1977). Yet recent conflicts have been characterised
by egregious assaults on art and sites: in the IranIraq (198088)
and Kuwait (199091) wars, the shelling of Dubrovnik (1991) where
perpetrators have been prosecuted, the demolition of the Bamiyan Buddhas
(2001), the looting of the Baghdad museum (2003), and the bombing of
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Samarras Golden Mosque (2006). This story of attempts to prevent and

shield, of loopholes and atrocities, is the subject of Roger OKeefes
thorough and timely study of the framework protecting cultural property
in war.
Behind OKeefes study is the curious fact that to some extent, it
has not been written before. The law of cultural property in war, and
the scholarship about that law, has been pigeonholed. General studies of
the law of armed conflict or international criminal law tend to say little
about cultural property. Protection of sites tends to be subsumed under
the principle of distinction and the law of bombardment, whether by air
or land. Protection of movable artifacts is pushed under the municipal
law of chattels and theft, statutes of limitation and restitution, and, when
involving a transnational claim, conflict of laws principles. Commentaries
on the Hague Convention and Protocols can be thorough, but largely
lack all historical context. Case studies usually arise from the burgeoning
scholarship about Second World War looted art treasures. For these
reasons, OKeefes study is not only well researched and written, it is
also surprisingly innovative.
OKeefe has also picked a good time for his study. As he rightly
points out (p.360), the field of cultural property has been in flux, with
rules and approaches changing because of the 1999 Protocol and the
start of the International Criminal Court. Now the field seems to have
entered a period of consolidation, and the largely descriptive study that
OKeefe intends (pp.1, 360) is precisely what researchers need. As an
added bonus, OKeefes resolutely descriptive aim helps him avoid the
intellectual whiggishness that is the international lawyers occupational
hazard, a mindset wherein adherence to an alleged rule shows that it
exists, while a breach also proves the rule because of the condemnation it
brings. OKeefe knows that his job is daunting enough just to summarise
the rules, place them in context, and critique them, leaving no time for the
praiseful tone often found in international law scholarship. The result here
is not only a very successful academic study, but a one-volume work so
thorough that it will be a vade-mecum for museum officials and diplomats
going on fact-finding or negotiating missions.
The book is chronologically arranged, and so the latter two-thirds of
the book, close to the present in coverage, consists largely of analyses
of the texts of the Conventions and Protocols. OKeefe combines a close
legal reading with an immersion in the drafts, preparatory meetings, and
national positions that went into the final negotiation. This may sound
unremarkable, but most other works on the topic are syllogistic, marching
through conventions and protocols, reciting familiar key articles, and opining blandly that this or that modification was a response to the failure of a
previous governing text. OKeefe offers much more in the way of context,
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showing the principles at work across the texts and decades. His presentation of the provisions for special and enhanced protection in the Convention and Second Protocol (pp.140156, 263271) is helpful. More generally, his recurring discussions of the narrowing of the necessity exception, the change from the military necessity formula to military objective, and the continued development of the common heritage rhetoric
for art and sites, are nuanced and learned. This reviewers only complaint
was that OKeefe might have shown how the common-heritage rhetoric,
however idealistic, can clash with the alternative conception of cultural
property as ethnic and national, a point made elsewhere by Geoffrey Best.
By contrast, in the first third of the book OKeefe has a more complex
challenge. In the absence of codification or a dedicated convention, the
older law of cultural property has to be teased out from national practice
and codes and the writings of the publicists, in short, from a multitude
of examples, and OKeefe does so skilfully. He surveys two obscure
Dutch proposals to protect cultural property after the First World War
(pp.4143) and the late 1930s, after Guernica (pp.5360), and offers
insight into Second World War bombing technology and the law (pp.2,
63). He explains the republic of letters rhetoric (pp.89) and the shift
from military restraint to material protection theories for site protection
(p.42). OKeefe has a good nose for detail, and it is a pleasure to learn from
him of the Newfoundland Prize Court (p.16), or the bombing of Ancona
and Venice and Whitby in the First World War (p.37), or of Roerich,
Diaghilevs designer and activist who lobbied for the 1935 inter-American
agreement that bears his name (pp.40, 5152).
Inevitably there are omissions. Why no mention of Grant for allegedly
targeting church steeples during his siege of Vicksburg, or of the origins of
the historic monuments movement not in Victorian statutes (pp.1618), but
rather with the early 19th century romantic sensibility that found beauty in
bare ruined choirs? Why no mention of the cult of reverence for memorials
and graveyards immediately after the American Civil War? But even the
recitation of these examples underscores OKeefes observation (p.3) that
given the multitude of historical precedents he would collect examples
only to the extent needed to illustrate trends. And OKeefe has a readers
gratitude for avoiding the fashionable practice of illustrating arguments in
this area with yet another example from Shakespeares Henry V.
There are also small errors of fact or implication in this historical
section. The later 12 Nuremberg trials were not military tribunals (p.89), as
the judges (all civilian), occupation zone officials, and federal courts back
home agreed. Alfred Rosenberg was not, as OKeefe repeatedly implies
(pp.8889, 336, 349, but see p.81), the only important Nazi convicted of
looting in the first Nuremberg trial. OKeefes estimate of over a thousand
Germans sought for trial by the Allies after the First World War (p.44)
exceeds the conventional figure by a hundred and requires support.
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OKeefes historical survey, while far-ranging, can occasionally be

misleading. While thorough in describing Allied bombing of Italy
(pp.6973) and its toll on cultural property, he is surprisingly cursory
about the most terrible theatre in the entire war, the Eastern Front, where
the genocidal war against Russians, Poles, and others, Jewish and nonJewish, very much involved the destruction of their cultural, religious,
and historic sites and objects. Add to this OKeefes references to Jewishowned private collections (pp.62, 83) but not to the millions of nonwealthy Jews whose synagogues or books or cemetries were destroyed;
his suggestion that German behaviour on the Southern and Western fronts
was largely acceptable (pp.79, 87), presumably excepting Jewish sites;
the non-judgmental passages about Field Marshal Kesselring (pp.76, 79),
condemned to death after a tolerably fair trial by a British military tribunal
and furtively given early release, as British historian Donald Bloxham
has shown; the anodyne description of the German destruction of Warsaw
that avoids associating it with the Ghetto uprising (p.82); and his hurried
conclusion that Nazi behaviour was moral perversity (p.62), no more,
and one leaves OKeefes section on the Second World War with a sense
that it should have been edited one more time for tone at the least.
This reviewer would also have preferred a richer discussion of Allied
aerial bombing. OKeefe rightly devotes time to this, given its importance,
relying on statements by Air Marshals Trenchard and Bomber Harris
and the writings of J.M. Spaight (pp.4950, 6268). These were leading
figures, but they ought to have been only the start of his inquiry. There
were divergent views even within British Bomber Command, between
Bomber and Fighter Commands, and certainly between them both and
some of the American commanders, whose planes, missions, and attitudes
were different. Equally, ever since Italian General Douhet had persuaded
strategists a generation earlier, it had been widely accepted that heavy
bombers would be the winning weapon in the looming next war. Many
commanders remained persuaded until the end of the war when strategic
bombing surveys showed otherwise, and General Curtis LeMay continued
to believe in heavy bombing during the Vietnam War. Game theorists, such
as George Quester, have mapped out what air commanders must have
intended, based not on their public statements (pp.6567), but rather on
what they knew of and did in response to the other sides behaviour, some
of it inadvertent or mistaken. Nor is it only Second World War bombing
that gets short shrift. OKeefe has nothing to say about the Vietnam War,
a remarkable omission given the tonnage of ordnance dropped and the toll
exacted on Buddhist sites; surely a monograph with three dozen references
(many of them reasonably balanced) to Israeli cases and General Assembly
condemnations thereof could devote a paragraph to the longest-running
war of the last 50 years and the enormous damage to cultural property. A
legal analysis of wartime bombing, one that seeks not only to document
AND
CONTRIBUTORS
JULY 2008]
Reviews and Notices
509
what the military historians know (sorties and damage) but to bring what
we lawyers can offer, an analysis of rules and norms, cannot rely so
heavily on a handful of theorists and commanders from World War II.
OKeefe knows this, and at one point even curiously distinguishes between
UK policy and RAF policy (p.64), but a more developed discussion is
urgently needed about so important a topic as urban bombing.
The book might also have benefited from a discussion of medieval
canon law or canonists. To be sure, ordinarily one might be pleased at
the departure from the formulaic references to the Just War and Chivalry
traditions. But in this one area, cultural property, the canonists are highly
germane, having posited the immunity of the Church, its servants, and
church property relatively early. Of course the rules were frequently
ignored by barons or kings, occasionally by other churchmen, and during
the Reformation by iconoclastic protestants. The Renaissance fathers of
international law with whom OKeefe begins were themselves part of a
context, and their rules about the deference to, if not full immunity of,
certain targets grew out of that medieval tradition of church protection in
ways that ought to have been discussed.
Lastly, OKeefe might have devoted space to the European encounter
with indigenous peoples from the 16th to 19th centuries and its significance for cultural property. To the white world, these encounters were
raids or trading missions or skirmishes and, soon enough, were uprisings by now-colonised subjects. They were rarely seen as international
armed conflicts, with rights on both sides. But that was only the white
view, made dogma by hindsight and the fact of conquest. To the Indian
or African or New World or Aboriginal peoples, these encounters when
violent were often wars, international armed conflicts if we must. Among
the many consequences of these encounters was the seizure and destruction of what are now recognised as indigenous cultural property, items
that today are occasionally made the subject of belated restitution (e.g.
the Native American Graves Protection and Repatriation Act, 25 U.S.C.S.
3001 et seq.). The norms governing these encounters, while historically
only on the fringes of the Law of War tradition, surely require inclusion in
the evolving understandings of that body of law. Right now, the impetus
for such broadened scholarship comes not from international law scholars, but from imaginative anthropologists and historians. Perhaps OKeefe
could, in a later book, weave into his tale some of these asymmetric norms
from frontier and expansionist wars, one result of which was to stock the
museums and palaces of Europe.
Roger OKeefe has written a superb book that will interest readers from
the scholarly and the museum, diplomatic, and military worlds. It is easily
the best book available today about cultural property in war. It is broad,
deep, and honest: he concludes for instance, with apparent regret, that the
destruction of the Bamiyan Buddhas was not illegal under international
AND
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[Vol. 124
law (pp.9899, 339). To the degree that a few historical passages need
smoothing over, that can easily be done. Aside from that, we are all in
Dr OKeefes debt.
JONATHAN A. BUSH.*
European Land Law. By PETER SPARKES. [Oxford: Hart Publishing. 2008.
634pp. Hardback: 55].
THIS is an original, important and wide-ranging book. Judged by its
cover, this book would appear to be addressing the question of the
feasibility or desirability of a uniform set of European land law rules.
Aside from, perhaps, Matteis Basic Principles of Property Law (2000)
or von Bars partial survey in Sachenrecht in Europa (2000), no such
exercise has been undertaken in recent times (though an addition to
the Ius Commune series by the same publisher is expected this year
on this very subject). As the author acknowledges, however, anyone
seeking to master the material in order to produce such a book faces
considerable practical difficulties. Aside from usual problems of language
and access to materials, there are also obvious conceptual differences (the
doctrine of estates, equitable interests, etc.) which can render comparisons
difficult. The author therefore contemplated, but ultimately rejected a
broad comparative exercise (p.xii).
Technical difficulties aside, there has also been little practical demand
for comparative land law work. While the comparative law of contract
and torts has become a well-resourced and controversial industry kickstarted by the European Commission and Parliament, harmonisation of
substantive land law principles is a more remote prospect, and the practical
claims made for uniformity of private law are weakest in relation to land
(see, e.g. Bright and Bright, Europe, the Nation State and Land in
Bright and Dewar (eds), Modern Studies in Property Law (1998)). The
author himself finds it unlikely that a substantive European land law will
emerge (p.61). The author happily does not ignore that debate altogether
(see, e.g. pp.360375, where he addresses the question of codification).
This is not, then, a comparative treatise on European principles relating
to land law, nor is it directly an investigation into the need for and
mechanics of harmonisation of land law. To that extent, the title does
not quite capture the substance of the book. Rather, the books primary
focus (Ch.1) is on the transactional law relating to transfers of land. This
falls into three broad categories: (1) European law on capital transfers
where the capital is in the shape of land; (2) the European regulatory
framework for contracts in so far as those contracts are for the disposition
of land; (3) conflicts rules applicable to land and contracts relating to
land. The author examines the formation, execution and enforcement of
* Washington DC.
AND
CONTRIBUTORS
JULY 2008]
Reviews and Notices
511
land-related contracts. In so doing, the book illuminates areas of law

which English lawyers have had a tendency to overlook. It traces the
history of the regulation of capital movements, and more specifically
of land transactions, with a cross-border flavour (pp.2325; also the
momentous decision in Konle v Austria (C-302/97 ) [1999] I E.C.R.
3099, discussed at p.26). It then considers a disparate range of legal
materials, the connecting factor between which is their specific impact
on parties to land transactions.
The author examines restrictions on acquisition of land by foreign
nationals (Ch.2). Thereafter, the author considers the question of conflicts
rules as they relate to land actions (Ch.4; conflicts rules relating to
contract and related actions are considered in Ch.10). He then turns to
the European regulation of marketing of land (Ch.5, which considers the
familiar European regulation of unfair contract terms, distance selling,
e-commerce, etc.) and the important but oft-overlooked regulation of
timeshares (Ch.6). There follows a chapter, Conveyancing (Ch.7),
which actually deals rather more with conveyancers, their qualifications
and regulation. The meat of the transactional side of land law is dealt
with in Ch.8, which deals with European contract regulations as they
affect contracts for the sale of land, and mortgages and debts including
insolvency (Ch.9). Chapter 11 is perhaps more free-standing, dealing with,
amongst other matters, the European regulation of the law of trusts (an
area hitherto thought uniquely English, but which has nonetheless proven
susceptible to valuable comparative work) as well as family property
related matters including the proposed harmonisation of marriage, divorce
and family property (Rome III; the UK has opted out). The authors case
for the importance of an understanding of the European dimension to
cross-border transactional law relating to land is compelling. His image
in the preface of title deeds all over Europe being reshuffled on a giant
Monopoly board has a truthful ring to it, though the process is likely to
be a slower one than the image suggests. His book marshals such materials
as there are as expertly as is possible.
Although cross-border transactional aspects are in the foreground, the
author does not ignore the fact that European standards also play a part
in the internal working of national property systems. We have had a
recent reminder of this in the form of the decision of the Lands Tribunal
in Canary Riverside Pte Ltd v Schilling (LRX/65/2005). The author is
also alive to the impact of European legislation upon national legal
systems internal rules and standards, such as standards of fairness (see,
e.g. pp.347354). Areas in which European law has infiltrated domestic
property law are dealt with chiefly in Ch.3 (Towards a European Land
Law?), in which the ostensible subject of this bookEuropean land
lawis considered and rejected as a possibility. The author is right to
observe that the rules set out in Ch.3 have not coalesced into a coherent
AND
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[Vol. 124
body of property law. The rules are too scattered and too particular to
furnish the raw materials for a European land law. As of today, the author
is surely right that it cannot be argued with any realism that behind
this bulky but disparate collection of laws there hides a pan-European
conception of property awaiting discovery, as some have sought to argue
is the case so far as contracts are concerned (though the legitimacy
of the claim in relation to contracts is stronger (p.130)). To that one
might also add that the arguments for a uniform contract law do not
apply to land law with the same force. While there is at least a case
for harmonisation of contracts to enhance certainty and facilitate highvolume, rapid trade between businesses or businesses and consumers, land
transactions ordinarily tend to be low-volume, slow, and will inevitably
involve the assistance of a local lawyer, through whom it is hoped that
the uncertainties of a foreign property law system will be mitigated. There
is presently no clear-cut transaction costs argument which justifies any
upheaval of settled principles of property law.
The question which remains open, however, is what the future will hold
for more limited harmonisation of specific areas of property law. There
appear to be two conceivable ways in which limited harmonisation of
parts of substantive property law might occur. First, there may be a need
to look, not at property law as a whole, but at limited parts in isolation.
It may be that there is a business case for an optional European form
of real security or lease supplemental to national laws on the subject
(both areas are the subject of ongoing studies by the European University
Institute in Florence and the Common Core of European Private Law
Group (to name but two)).
Secondly, it may well be that the European contract project will have
consequential effects on aspects of the law of property. The underlying
premise of some of the work being carried out in relation to the European
contract project is that limited parts of national land law may not remain
unaffected, though the general trend in the literature has been to focus
only on movable property law, and to excluded immovables altogether (see
pp.367372). It seems doubtful, however, that land law could be excluded
from a contract code altogether, were one ever to see the light of day.
The author is well aware of this potential for future development, though
in light of the uncertainties as to whether, and if so how, substantive
harmonisation of private law, or some part of it, might occur, he was
probably wise not to address such hypotheticals in detail. However it may
well be that the question will become sufficiently ripe to merit a chapter
in the next edition of this valuable volume.
OLIVER RADLEY-GARDNER.*
* Pembroke College, Oxford.
AND
CONTRIBUTORS
JULY 2008]
Reviews and Notices
513
Buying Social Justice: Equality, Government Procurement, and Legal

Change. By CHRISTOPHER McCRUDDEN. [Oxford: Oxford University
Press, 2007. lii + 680 pp. Paperback: 39.95].
IN Buying Social Justice: Equality, Government Procurement, and Legal
Change, Christopher McCrudden, Professor of Law at the University of
Oxford, continues and considerably extends his earlier well-received work
examining practices and governance of government procurement. It is
a lengthy book, covering over 600 pages in 18 chapters, chronicling
experiences from an admirably wide range of jurisdictions, not only
within Europe and North America, but also countries such as Malaysia
and South Africa. It is quite clearly the product of detailed and
painstaking researchboth text-based and in some cases based on
interviewsacross many aspects of the law and practice of government
procurement.
Large sections of the book are heavily descriptive, involving detailed
accounts of the content and evolution of government procurement
practices across the world. At its best, the descriptive content of the
book succeeds in conveying processes of legal evolution in their rich
historical and political context, and sensitively captures the deeper
dynamics, as well as the ambiguities, of real-world experiences of different
government procurement regimes. Good examples include Chs 11 and
12, chronicling changes in procurement practice across a variety of
European jurisdictions from the 1990s onwards, which chroniclethe
account of the development of European corporate social responsibility
(CSR) initiatives is particularly striking for the way that it manages to
connect activities occurring in many different institutions across many
different levels of governance into a single story. The discussion in Ch.8
of OECD procurement reform efforts is also fascinatingthe historical
and textual detail of this account will no doubt make it a useful
reference work for future interpretive work dealing with the WTOs
Agreement on Government Procurement Agreement (GPA). Indeed, the
entire book works well as a reference text: the rich empirical detail
of each case study, as well as the sheer number of them, on their
own make this an important text for those interested in procurement
issues.
Not all descriptive passages, however, are equally successful. There are
some sections of Parts I and II which appear more as accumulations of
facts than textured accounts of historical transformations. The material in
Chs 3 and 4 (especially when dealing with non-European contexts) too
often simply describes the content of important texts and their revisions.
Chapters 6 to 9 promise to chart the effects of the GPA model on its
members, but in the end the causal links between domestic change and
international agreements were not sufficiently spelled out, and the reader
AND
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[Vol. 124
was left with relatively unconnected accounts of change in procurement

regimes in North America and elsewhere, and an account of the negotiation and content of the GPA. More generally, it is hard to escape the
feeling that too great a proportion of the book consists of the recounting of facts: the book would have been enriched by greater use of the
authors own editorial voice, interrupting long discussions of the content
of texts and the progress of particular political debates with further critical reflection. The normative material set out in Ch.5, for example, could
have provided a strong foundation for criticism and reflection on some of
the more simplistic normative positions taken by actors within the kinds
of procurement debates described in subsequent chapters. In Ch.9, an
excellent discussion of Malaysias complex involvement in international
procurement negotiations prompts the reflection that any theorizing about
the development of public procurement regulation [needs] to take into
account the development dimension in a way which accommodates this
complexity (p.291). McCrudden is right, of coursebut one cannot help
feeling disappointed that the reflection stops there, and that such theorising fails to eventuate from an author who is among the most qualified to
provide it.
There are also important arguments in the book which deserve further
elaboration and exploration. In Ch.16 (at pp.522531), McCrudden
takes on directly the claim that governments ought only to take into
account economic or commercial considerations in their procurement
decisions, and ought not to import secondary social concerns into
such decisions. In essence, his argument is a simple one: that social
concerns can be and sometimes are integrated into the very subjectmatter of the contractthat is to say, governments may choose to
purchase not widgets but widgets made by a workforce drawn from the
unemployedand in such cases the rigid distinction between economic
and social concerns is exposed as incoherent. This argument seems to
me to strike right at the heart of the matter. Debates about government
procurement are, in one aspect, about the proper behaviour of governments
as they enter markets as participants: should they act just as other market
participants act (that is, taking into account only economic concerns), or
should they be permitted to act on the basis of a broader set of concerns?
Such debates usually proceed on the basis of an unspoken model of how
normal market participants behave, and on the basis of an implicit set
of economic concerns which are presumed to guide such actors. These
models, it should be added, are typically unrealistically narrow: is it really
true, for example, that the labour conditions in which a product is made
are (or should be) irrelevant to the purchasing decisions of the normal
market participant?
It follows, therefore, that debates over procurement are also about
defining and entrenching particular models of market behaviour more
AND
CONTRIBUTORS
JULY 2008]
Reviews and Notices
515
generally, and establishing a narrow range of concerns to which market

participants ought to look, to guide their behaviour. By a process of mutual
constitution, therefore, debates about how governmental behaviour can
and ought to differ from private market behaviour tend to create and
disseminate images of what normal market behaviour looks like. Put
another way, public procurement becomes an arena in which struggles
over the redefinition and reconstitution of market behaviour are played
out. (Indeed, much the same can be said about the current anxieties
about sovereign wealth funds, which could be put alongside procurement
debates as another site in which such a struggle is occurring.) It is quite
clear that McCrudden understands this pointit is the logical extension
of the argument that he makes. But I would have preferred that it be
made more explicit, and its implications to penetrate more deeply into
the other sections of the book. Too often, in the remainder of the book,
McCrudden seems to deploy precisely the problematic distinction between
the economic and the social he so effectively undermines in Ch.16,
and thus obscures the contested nature of the line which divides one from
the other.
The final substantive Part of the book (other than the conclusion)
changes tack from the largely descriptive mode of much of the earlier
chapters, and engages with detailed questions related to the interpretation
of particular provisions of international and European procurement law.
These are accomplished chapters, providing balanced and subtle analyses
both of the law and of the institutional contexts within which it is to
be applied. The typology of different conceptions of equal treatment in
Ch.16 (pp.512 et seq.) is particularly useful and clear. At the same time,
this Part could have done more than focus solely on questions of legal
interpretation. In its opening chapter, the book promises a reflection on
the role of law in the socio-political processes it describes. In the end,
as the final chapter makes clear, the range of this reflection is narrowed
over the course of the book to three questions only: the extent to which
procurement linkages go beyond what is legally required, the extent to
which such linkages are legally permitted, and the extent to which law
facilitates such linkages (pp.574575). This range of questions seems
unduly restricted, and does not seem to do justice to the rich empirical
material presented in earlier chapters, which could have formed the basis
for deeper reflection on (for example) the role of law in processes of
policy learning and diffusion, as a venue for political contestation, or as
a vector of domestic institutional change.
There is to my knowledge no book on government procurement
practices which is as rich and comprehensive in descriptive detail, nor
which ranges over as many different jurisdictions as Buying Social Justice.
Even at that level, it is an interesting and informative read, and a useful
reference work for those wishing to pursue research in this area. Though
AND
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[Vol. 124
some readers may complain about the lack of a single thread tying the
argument of the book togetherand in a book of this length that is to some
extent inevitableall will certainly find sections of great value within its
pages.
ANDREW LANG.*
* London School of Economics.
AND
CONTRIBUTORS

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Apparent gifts: re-examining the equitable

REVIEWS AND NOTICES

Sparkes: European Land Law

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International Law in Domestic Courts: the Developing Framework

Vol.124 pp.347-516 July 2008

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the right to respect for private life. There is undoubtedly an interest in

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14 E.H.R.R. 153 at [76]). In consequence, Lord Bingham concluded that

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subject-matter and history of this Act . . . its very purpose being to

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one of the exceptions recognised in Bankovic, it was unexceptionable.

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provision orders on divorce as transactions at an undervalue the former

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(2008) 124 L.Q.R., JULY SWEET & MAXWELL

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The Court of Appeal reversed the judgment below on the promissory

requirement to show substantive inequitability is treated as satisfied of

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Arden L.J. in Collier on the basis of Lord Dennings statement in Rees),

(2008) 124 L.Q.R., JULY SWEET & MAXWELL

APPARENT GIFTS: RE-EXAMINING THE EQUITABLE PRESUMPTIONS

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equitable obligation on the part of a husband or father to advance his wife

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advancement be regarded as strong in the case of an abusive father

(2008) 124 L.Q.R., JULY SWEET & MAXWELL

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Australia (Gleeson C.J., Gummow, Heydon and Crennan JJ.) formally

The meaning of the word repudiation was considered. Two meanings

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of the application of the judicial process. Effectively, there is no

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The use of a third category creates many difficulties of application. The

reductionism in application. However, it may be said that both Vella and

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