Examining the Law Syllabus: The Core

By P. B. H. Birks; Society of Public Teachers of Law (London, England) | Go to book overview

6. Company Law through the Cases

LEN SEALY

BY the time that students come to the study of Company Law, they will usually have covered courses in subjects such as Contract and Tort which have their roots deep in the common law and which may rightly be regarded as, in essence, case-law subjects--albeit now glossed or even, in some areas, superseded by latterday statutes. Such subjects lend themselves very naturally to teaching by some form of case-law technique: not necessarily on the transatlantic model, but in virtually every lecture, seminar, tutorial, essay or examination question the assumption will be that the student should be encouraged to look for principles in the cases and to use the cases as a primary source of law.

There is merit in teaching these subjects from the cases for another reason: the cases relate the law to real life, and help to get across the message that the law is a practical science looking for answers that square with accepted values and with common sense. But the case-method also makes the learning process easier by illustrating the principles with factsituations which are, on the whole, fairly simple to picture and are even, occasionally and with luck unforgettable. The snail in the bottle, the smoke ball, the chocolate wrappers, the elephant and the midget linger on in the memory; and with the images hopefully, at least in part of the accompanying message lingers too.

One consequence of this pattern of teaching and study is that students come to like decision-based law: by the time they reach company law they have acquired techniques for assimilating case material and learned to handle it in writing essays and answering problems. It is hard to generate anything like the same enthusiasm for legislation. It seems that, however much we may try to steer them in the other direction, students faced with a free choice of five questions out of ten or four out of eight in a company law examination will go first and foremost for the case-law topics such as directors' duties, and leave financial assistance1 or repurchase of shares2 severely alone. But, with the proportion of statute law progressively increasing and overtaking the old case-law in significance, there is a clear risk that the picture of the subject that the student is likely to get will be incomplete and badly distorted. What is to be done?

It is proper that we should use the decided cases in teaching company law for at least some of the same reasons as apply to the common-law subjects, even if we may have to do so with caution. In the first place, the company as a form of association is considerably older than the Companies Acts, and so is the concept of the corporation. Even that celebrated pons asinorum, the rule in Foss v. Harbottle,3 pipped the earliest Act of 18444 by a narrow margin. And so it is right to regard a good number of the principles and doctrines that are fundamental to company law as judge-made products, which have come into existence independently of the legislation and which in some cases survive even today unaffected by it. And it is just as important, in my view, for students of company law to realize that the issues before the courts in company cases are usually not matters of pure abstraction, but involve human protagonists and human judges. Minority members' rights in a private club ( Gaiman v. National Assn for Mental Health5) are rightly not judged by the same criteria as minority member's rights in a flat-owners' co-operative ( Estmanco v. G.L.C.6). The treatment of the North American shareholders in Mutual Life Insce Co. of New York v. Rank Organization Ltd7 was by any objective standard discriminatory but, for the City, a lot was at stake: too much to trigger s. 459 relief.8 We may not have very many smokeballs or snails in bottles to give company law cases a lighter touch, but at least we can use the cases to give the subject some vitality and some relevance to the wider world. And if in the process students learn that it may be dangerous to generalize for all company law from the facts of one (possibly atypical) case, so much the better.

Caution does, however, need to be exercised in the use that is made of the cases. This theme will be developed in the paragraphs that follow; but--to make one obvious point--many of the rulings given a century ago were arrived at with a company (actual or notional) in mind that has no recognisable counterpart in the commercial world of today: the

____________________
1
Companies Act 1985, ss. 155-156.
2
Companies Act 1985, ss. 159-181.
3
(1843) 2 Hare 461.
4
Joint Stock Companies Act 1844.
5
[1971]Ch. 317; [1970]2 All E.R. 362.
6
Estmanco (Kilner House) Ltd v. Greater London Council [ 1982] 1 W.L.R. 2; [1982] 1 All E.R. 437.
7
[1985] B.C.L.C. 11.
8
Companies Act 1985, s. 459 (minority shareholders' remedy for unfairly prejudicial conduct).

-37-

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