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Archive for June, 2012

On Friday (15 June 2012) I read an interesting piece entitled “Russia calls to overturn foreign rulings prompt strong criticism” by Rose Orlik of Incisive Media. It read like this:

Top court moots powers to set aside foreign arbitration awards

International arbitration awards could be set for challenges in the Russian courts after the head of the country’s Supreme Commercial Court called for powers to overturn foreign rulings if they are not in the national interest.

At a conference in St Petersburg last month, Anton Ivanov said Russian judges should have the power to set aside arbitral awards made in overseas jurisdictions if they are felt to unfairly prejudice Russian parties.”

Now I am no lawyer but this seems nonsense to me. Forgetting the New York Convention 1958 (NYC) for the moment, I have argued elsewhere that an arbitral award is just a piece of paper recording a private decision and has nothing directly to do with the legal system itself. A court may purport to set it aside and yet the words remain. “Eppur si muove” [Galileo]. Whether or not a court will recognise it and enforce it is another matter, but I know of no Order that an award be torn up, burned, or otherwise destroyed. It is possible, but I have never heard of it.

The NYC, as many of my readers will know, provides that foreign awards will be recognised in other countries. Article V allows for those other countries to refuse to enforce an award. The precise circumstances may vary from country to country and the refusal is probably discretionary, but that’s more or less how it works (ask a lawyer). Only the court at the seat can set the award aside. Other courts may refuse to recognise it; they can always find policy grounds if the award doesn’t suit them.

The problem courts have is that they can only rule where they can exercise power, that is to say where they can send the army or their policemen. Their power is territorial (there are exceptions – some people will send their armies anywhere, but we needn’t go into that!). This isn’t just about Russia, the same is true of Ruritania or to use the names from the Willem Vis Moot, Danubia, Oceania or Mediterraneo.

So Oceania can refuse to enforce an award made in Danubia but she can’t overturn it. Even though the courts of Danubia can overturn it, set it aside or declare it a legal nullity, because its a Danubian award, they can’t destroy it. “The moving finger writes and, having writ, moves on. Nor all your piety nor wit can lureit back to cancel half a line, nor all your tears wash out one word of it.”

This all sounds far fetched stuff but it happened in Hilmarton [ Omnium de Traitement et de Valorisation SA v Hilmarton Ltd (Com Ct, NLD, June 8 1999, [1999] 2 Lloyd’s Rep 223) and Hilmarton Ltd v Omnium de Traitement et de Valorisation (OTV). XX YBCA 663 (1995).Cour de Cassation France, 23 March 1994.]. There was a Swiss arbitration which was annulled by a Swiss Court, after which there was another arbitration with the reverse result. The French Court recognised the first (overturned) award, the British Court recognised the second. The French Court saw an autonomous document in spite of its annulment in Switzerland. I ought to write a paper on all this but many have done so already.

Let’s get back to where we started. The court in Oceania can use the NYC as it chooses within Oceania; who’s to stop it? So it can ignore it. So far so good. The award was made in Danubia so Danubia can overturn it – or try to, see Hilmarton again. But let’s say Danubia lets it stand. There’s no risk to the loser in Oceania. Oceania doesn’t like the award. But what of the Oceanian loser’s assets in Mediterraneo? A court in Mediterraneo would enforce the award unless persuaded that Oceania’s policy has merits.

Essentially my suggestion is that a nation can’t reach beyond its own boundaries and its own citizenry (and bodies corporate). A private piece of paper can go anywhere in the world bearing an autonomous decision. Isn’t that strange? It does mean that a deal’s a deal, whether the head of a country’s Supreme Commercial Court likes it or not.

Perhaps that’s the price of freedom.

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That Ginger Beery Snail

I transcribed the text of The Times report of this wonderful case, in which Lord Atkin drew the somewhat strange conclusion, for the day, that: “It would be an advantage to make it clear that the law in this matter, as with most others, was in accordance with sound common sense.”   What we should remember is that, of five Law Lords, two (Lord Buckmaster and Lord Tomlin) felt otherwise.   My understanding of Lord Atkin’s essential finding is in orange, presque gold.

It’s not common for issues of tort to come to arbitration but it is, or ought to be, a relatively inexpensive way to apply the sound common sense which an example like this requires.

The full report is available at my website courtesy of BAILII.

HOUSE OF LORDS

DEAD SNAIL IN GINGER-BEER BOTTLE: LIABILITY OF MANUFACTURER

M’ALISTER OR DONOGHUE (PAUPER) v STEVENSON

Before Lord Buckmaster, Lord Atkin, Lord Tomlin, Lord Thankerton, and Lord Macmillan.

The House, by a majority (Lord Buckmaster and Lord Tomlin dissenting) allowed this appeal from an interlocutor of the Second Division of the Court of Session in Scotland recalling an interlocutor of the Lord Ordinary, Lord Moncrieff.

The appellant, a shop assistant, sought to recover from the respondent, an aerated water manufacturer, on the ground of his alleged negligence, £500 as damages for the injurious effects alleged to have been produced on her by the presence of a snail in a bottle of ginger beer manufactured by the respondent and ordered for the appellant in a shop in Paisley by a friend of the appellant. In consequence of her having drunk part of the contaminated contents of the bottle the appellant alleged that she contracted a serious illness.

The bottle was stated to have been of dark opaque glass, so that, the condition of its contents could not be ascertained by inspection, and to have been closed with a metal cap, while on the side was a label bearing the name of the respondent,

The Lord Ordinary rejected the plea in law of the respondent that the appellant’s averments were irrelevant and insufficient to support, the conclusions of the summons and allowed a proof.

The Second Division, by a majority (the Lord Justice-Clerk, Lord Ormidale. and Lord Anderson: Lord Hunter dissenting), recalled the interlocutor of the Lord Ordinary and dismissed the action.

The appeal was heard in December last.

Mr. George Morton. K.C. and Mr. W. R. Milligan (both of the Scottish Bar) appeared for the appellant.; Mr. Normand, K.C. (Solicitor-General for Scotland), Mr. J. L. Clyde (of the Scottish Bar), and Mr. T. Elder Jones (of the English Bar) for the respondent

JUDGMENT

Lord Buckmaster, after stating the facts, said that before examining the merits two comments were desirable (1) that. the appellant’s case rested solely on the ground of a tort, based not on fraud but on negligence; and (2) that throughout, the appeal the case had been argued on the basis, undisputed by the Second Division and never questioned by counsel for the appellant or by any of their Lordships, that the English and the Scots law on the subject were identical. It was, therefore, on the English law alone that he had considered the matter and in his opinion it was on the English law alone that in the circumstances they ought to proceed.

The law applicable was the common law and, though its principles were capable of application to meet new conditions not contemplated when the law was laid down, yet themselves they could not be changed nor could additions be made to them because any particular meritorious case seemed outside their ambit.

Lord. Buckmaster then discussed a series of authorities, including George v. Skevington (L.R. 5 Ex., 1) and the dicta of Lord Esher in Heaven v. Pender (11 Q.B.D.  503, 509), on which the appellant relied.  As to George v. Skevington, he said that few cases could have lived so dangerously and. lived so long.  Lord Sumner in Blacker v. Lake and Elliot (106 L.T. 533) closely examined its history and he (Lord Buckmaster) agreed with his analysis. Lord Sumner had said that he could not presume to say that it was wrong, but he declined to follow it on the ground that it was in conflict with Winterbottom v. Wright (10 M. and W., 109), an authority which was closely applicable to the present case. As to Lord Esher’s dictum in Heaven v. Polder (supra), Lord Justice Cotton, in whose judgment Lord Justice Bowen concurred, said that he was unwilling to concur with the Master of the Rolls in laying down unnecessarily the larger principle which he entertained, inasmuch as there were many cases in which the principle was impliedly negatived, and the Lord Justice cited Collis v. Seldert (L.R., 3 CP., 195) and Longmeid v. Holliday (6 Ex., 761).

After a further review of the authorities, Lord Buckmaster said that so far as George v. Skevington (supra) and the dicta of Lord Esher in Heaven v. Pender (supra) were concerned, it was in his opinion better that they should be buried so securely that their perturbed spirits should no longer vex the law. In his view the authorities were against the appellant’s contention and, apart from authority it was difficult to see how any common law proposition could be formulated to support her claim. He was of opinion that the appeal should be dismissed.

Lord Tomlin read a judgment in which he entirely agreed with the reasoning and conclusions of Lord Buckmaster.

Lord Atkin’s View

Lord Atkin in delivering judgment., said that the sole question for determination was legal: Did the averments made by the pursuer in her pleading if true disclose a cause of action: The question was whether the manufacturer of an article of drink sold by him to a distributor in circumstances which prevented the distributor or the ultimate pure chaser or consumer from discovering by inspection any defect was under any legal duty to the ultimate purchaser or consumer to take reasonable care that, the article was free from defect likely to cause injury to health. He did not think a• more important problem had occupied their Lordships in their judicial capacity: important; both because of its bearing on public health and because of the practical test which it applied to the system of law under which it arose.  The case had to be determined in accordance with Scots law: but it had been a matter of agreement between counsel who argued the case, and it appeared to be the basis of the judgments of the Judges of the Court of Session that for the purposes of determining this problem the law of Scotland and of England were the same.

He spoke with little authority on this point, but his own research satisfied him that the principles of the law of Scotland on such a question as the present, were identical with those of English law and he discussed the issue on that footing. The law of both countries appeared to be that, to support an action for damages for negligence, the complainant had to show that he had been injured by the breach of a duty owed to him in the circumstances by the defendant to take reasonable care to avoid such injury. In the present case they were not concerned with the breach of the duty; if a duty existed that would be a question of fact which was sufficiently averred and for present, purposes must be assumed. They were solely concerned with the question whether as a matter of law in the circumstances alleged the defender owed any duty to the pursuer in take care.

It was remarkable how difficult it was to find in the English authorities statements of general application defining the relations between parties that gave rise to the duty. The Courts were concerned with the particular relations which came before them in actual litigation, and it was sufficient to say whether the duty existed in those circumstances. The result was that the Courts had been engaged on an elaborate classification of duties as they existed in respect of property whether real or personal with further divisions as to ownership, occupation, or control, and distinctions based on the particular relations of the one side or the other, whether manufacturer, salesman, or landlord, customer, tenant, stranger, and so on.

In that way it could be ascertained at any time whether the law recognized a duty, but only where the case could be referred to some particular species which had been examined and classified. And yet the duty, which was common to all the cases where liability was established, must logically be based on some element, common to the cases where it was found to exist. To seek a complete logical definition at the general principle was probably to go beyond the function of the Judge, for the more general the definition the more likely it was to omit essentials or introduce non- essentials. The attempt was made by Lord Esher in Heaven v. Pender (supra) in a. definition to which he would later refer. As framed it was demonstrably too wide, though it appeared to him if properly limited to be capable of affording a valuable practical guide.

At present he contented himself with pointing out that in English law there must be and was some general conception of relations giving rise to a duty of care, of which the particular cases found in the books were but instances. The liability for negligence, whether one styled it such or treated it, as in other systems, as a species of culpa, was no doubt based on a general public sentiment of moral wrong- doing for which the offender must pay. But acts or omissions which any moral code would censure could not in a practical world he treated so as to give a right to every person injured by them to demand relief. –

In that. way rules of law arose which limited the range of complainants and the extent or their remedy: The rule that one was to love one’s neighbour became in law one must not injure one’s neighbour, and the lawyers’ question who was one’s neighbour received a restricted reply. One must take reasonable care to avoid acts or omissions which one could reasonably foresee would be likely to injure one’s neighbour.  Who then in law was one’s neighbour? The answer seemed to be persons who were so closely and directly affected by one’s act that one ought reasonably to have in in contemplation as being so affected when directing one’s mind to the acts or omissions which were called in question.  That appeared to him to be the doctrine in Heaven v. Pender (supra) as laid down by Lord Esher when it was limited by the notion of proximity introduced by Lord Esher himself and Lord Justice A. L. Smith in Le Lievre v. Gould ([1893] 1 Q.B. 491).

A Necessary Qualification

With that necessary qualification of proximate relationship as explained in Le Lievre v.  Gould, he thought that the judgment of Lord Esher expressed the law of England; without the qualification he thought that the majority of the Court in Heaven v.  Pender (supra) were justified in thinking the principle as expressed in too general terms.  There would no doubt arise cases where it, would be difficult to determine whether the contemplated relationship was so close that the duty arose.  But in the class of case now before the Court he could not conceive any difficulty to arise.

A manufacturer put up an article of food in a container which he knew would he opened by the actual consumer.  There could be no inspection by any purchaser and no reasonable preliminary inspection by the consumer.

Negligently in the course of preparation he allowed the contents to he mixed with poison.

It was said that the law of England and Scotland was that the poisoned consumer had no remedy against the negligent manufacturer.  If that were the result of the authorities he would consider the result  a.  grave defect in the law; and so contrary to principle that he would hesitate long before following any decision to that effect which had not the authority of that House.

He would point out that in the assumed state of the authorities not only would the consumer have no remedy against the manufacturer he would have none against anyone else; for in the circumstances alleged there would be no evidence of negligence against anyone other than the manufacturer; and except in the case of a consumer who was also a purchaser no contract and no warranty of fitness; and in the case of the purchase of a specific article under its patent or trade name, which might well be the case in the purchase of some articles of food or drink, no warranty protecting even the purchaser-consumer.  There were other instances than of articles of food send drink where goods were sold intended to be used immediately by the consumer, such as many forms of goods sold for cleaning purposes, when the same liability must exist.

The doctrine supported by the decision below would not only deny a remedy to the consumer who was injured by consuming bottled beer or chocolates poisoned by the negligence of the manufacturer, but also to the user of what should be a harmless proprietary medicine an ointment., a soap, a cleaning fluid, or cleaning powder.

Articles of Household Use

 He confined himself to articles of common household use, where everyone, including the manufacturer, knew that the articles would be used by other persons than the actual ultimate purchaser—namely, by members of his family and his servants, and in some eases his guests.  He did not- think so ill of their jurisprudence as to suppose that its principles were so remote from the ordinary needs of civilised society and the ordinary claims it made on its members as to deny a legal remedy where there was no obviously a social wrong.

It- would be found, he thought, on examination that there was no case in which the circumstances had been such as he had just suggested where the liability had been negatived.  There were numerous cases where the relations were much more remote where the duty had been held not to exist.  There were also dicta in such cases which went, farther than was necessary for the determination of the particular issues which had caused the difficulty experienced by the Courts below.  He ventured to say that in the branch of the law which dealt, with civil wrongs, dependent in England any rate entirely on the application by Judges of general principles also formulated by Judges, it was of particular importance to guard against the danger of stating propositions of law in wider terms than was necessary; lest essential factors be omitted in the wider survey, and the inherent adaptability of English law be unduly restricted.  For that reason it was very necessary in considering reported cases in the law of torts that he actual decision alone should carry authority, proper weight, of course, being given to the dicta of the Judges.

His- Lordship then referred to several authorities, which, in his opinion, supported the view that, in such a case as the present, the manufacturer owed a duty to the consumer to be careful, and distinguished certain other authorities referred to in the Court below as laying down the proposition that no such duty existed.

In conclusion he said that if their Lordships accepted the view that the appellant’s pleading disclosed a relevant cause of action they would be affirming the proposition that by Scots and English law a manufacturer of products which he sold in such a form as to show that he intended them to reach the ultimate consumer in the form in which they left him, with no reasonable possibility of intermediate examination and with the knowledge that the absence of reasonable care in the preparation or putting up of the products was likely to result in injury to the consumer’s life or property owed a duty to the consumer to take that reasonable care.  It was a proposition that he ventured to say no one in Scotland or England who was not a 1awyer would for one moment doubt.  It would be an advantage to make it clear that the law in this matter, as with most others, was in accordance with sound common sense.  He thought that the appeal should be allowed.

Lord Thankerton and Lord Macmillan delivered judgment agreeing that the appeal should be allowed.

Solicitors.―Messrs. Horner and Horner for Messrs. W G. Leechman and Co., Glasgow and Edinburgh; Messrs. Lawrence Jones and Co., for Messrs Niven, Macniven and Co., Glasgow, and Messrs. Macpherson and Mackay, W.S., Edinburgh.

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