Common Law

Question 1

What is meant by common law?

Answer 1

Decisions of courts made over centuries. These take the form of cases

Question 2

What is a precedent?

Answer 2

A decision of a court based on a set of facts. This must be followed by that court and lower courts in future if a similar event occurs again

Question 3

What two points of law may a case or precedent provide?

Answer 3

Ratio decidendi
Obiter Dicta

Question 4

What is meant by ratio decibendi?

Answer 4

The statement of law applied to the legal problem raised by the facts and upon which the decision is based.
- The reason for the decision

Question 5

What is meant by obiter dicta?

Answer 5

Things ‘said by the way’. Do not form part of the ratio decidendi and are not binding on future cases but are merely persuasive.
- Extra remarks made by the judge

Question 6

What should be considered when following a precedent?

Answer 6

• How far the facts of the earlier case and later case are similar
• If the differences appear significant the court may distinguish the earlier case and avoid following as a precedent

Question 7

What four things must be considered when examining a precedent before it can be applied to a case?

Answer 7

• Applicability of a precedent
• Strength of a precedent
• Overruling
• Avoidance of a binding precedent

Question 8

What is meant by applicability of a precedent?

Answer 8

• Decision must be based on a proposition of law, not just deciding what actually happened
• Must form part of the ratio decidendi
• The material facts must be comparable
• The earlier court must have equal or higher authority

Question 9

What are the strengths of using precedents?

Answer 9

• Certainty
• Saves parliamentary time
• Saves legal costs
• Flexibility
• Detail

Question 10

What are the limitations of using precedents?

Answer 10

• Limits judges’ discretion
• Social situations may change and precedent doesn’t adapt
• ‘bad’ precedents may become established

Question 11

What is meant by avoidance of a binding precedent?

Answer 11

Even if a precedent appears to be binding, there are a number of grounds on which a court may decline to allow it
- It may be able to distinguish the facts
- It may declare the ratio decidendi obscure
- It may declare an earlier precedent to be too wide

Question 12

What is meant by overruling?

Answer 12

A precedent may be overruled if it was established in error
- A practice direction issued by the house of lords in 1966 issued if a serious error becomes embodied in a decision of the house, it should be corrected as soon as possible
- Overruling should be permitted where failure to do so would involve the risk of injustice

Question 13

What are the court of appeals’ exceptions to following a precedent?

Answer 13

• Two or more conflicting earlier decisions, where it must decide which to follow
• Where previous decisions had been reversed or overruled
  -Previous decision had been made with a lack of care (per incuriam)
• Previous decision conflicts with a decision of supreme court

Question 14

What is meant by the strength of a precedent?

Answer 14

• Status of the court
• Decision - unanimous or majority
• Time
• Changing social circumstances

Question 15

Example of a precedent

Answer 15

Caparo Vs Dickman (1990)

Question 16

Caparo vs Dickman (1990)

Answer 16

Caparo Industries purchased shares in Fidelity plc in reliance of the accounts which stated that the company had made a pre tax profit of £1.3m. In fact Fidelity had made a loss of over £400,000. Caparo took action against auditors claiming they were negligent in certifying the accounts.

It was held that no duty of care was owed, as there was not sufficient proximity between Caparo and the auditors as the auditors were not aware of the existence of Caparo nor the purpose for which the accounts were being used by them.

Question 17

What does the court look at deciding whether someone owes another person a duty of care?

Answer 17

Foreseeability of damage - Could the defendant reasonably predict that their actions may cause harm to the claimant?

Proximity - Is there a close relationship between the parties (can be physical distance, created by actions, or legal relationship)

Fair, Just, and Reasonable - Would it be fair and reasonable for the law to impose a duty of care?

Question 18

How does the court treat economic loss differently from physical harm?

Answer 18

• Courts more willing to impose duty of care over physical injury or damage to property
• If people were owed duty of care over every financial consequence of what they say and do, liability would be unlimited and uncontrollable
• “Liability in an indeterminate amount, for indeterminate time, to an indeterminate class

Question 19

Exceptions to the rule of liability for economic loss

Answer 19

• Veil of a company can be lifted if being used as a fraud or cloak
• Groups of companies - subsidiaries may be agents of the principal parent
• Auditor liability

Question 20

What is meant by auditor liability?

Answer 20

• Auditors owe a duty of care to clients when there was a special relationship between the parties
• These include a request for info, provision of info knowing its purpose, and reliance upon given information.

Question 21

Limitations of auditor liability

Answer 21

• Caparo Industries vs Dickman (1990)
• Auditors don’t owe a duty of care to unknown third parties who act on its advice without a professional relationship in place
• There would be indeterminate liability to an unknown amount of potential claimants