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A fifth common law obligation

Published online by Cambridge University Press:  02 January 2018

Nicholas J. McBride
Nicholas J. McBride*
Affiliation:
Oxford
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Extract

This article is an attempt to add to our understanding of the map of common law obligations. That there is such a thing is an article of faith among those who believe that the common law is based on reason. Any map does three things: it represents a certain area; it enables us to locate any point on that area by providing us with axes of reference (for example, longitude and latitude) and it identifies certain points on that area as significant. The map of common law obligations covers the set of all possible duties. A duty is located in that set by reference to its pattern (its content) together with its origin (the set offacts sufficient to give rise to that duty). The map of common law obligations identifies all the duties which the common law may give effect to by compelling those who are subject to those duties to comply with them.

Type
Research Article
Information
Legal Studies , Volume 14 , Issue 1 , March 1994 , pp. 35 - 69
Copyright
Copyright © Society of Legal Scholars 1994

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References

1. The terms ‘duty’ and ‘obligation’ are used interchangeably.

2. This should not be necessary nearly 120 years after the Judicature Acts but: ‘common law obligations’ refer to those obligations recognised by the rules and doctrines of Law and Equity.

3. No duty when it is reasonably foreseeable that a lack of care would harm a trivial interest such as one's interest in making as large an amount of profits as possible: Spartan Steel and Alloys Ltd v Martin [1973] 1 QB 27. There will be a duty to take care not to inflict economic loss on another when it is foreseeable that lack of care would inflict economic losses of a peculiar importance, for example, involving someone losing his or her home: Smith v Eric S Bush [1990] 1 AC 831.

4. No duty to take care when it is foreseeable that one's actions would result in another being caused anything less than the severest mental distress: Alcock v Chief Constable of South Yorkshire Police [1992] 1 AC 310.

5. Recognition that the common law gives effect to such a duty can be found in Albacruz (Cargo Owners) v Albazero (Owners), ‘The Albazcro’ [1977] AC 774, 841C-D, per Lord Diplock.

6. For an account, see Burrows ‘Contract, tort and restitution — a satisfactory division or not? 99 LQ R217 (1983).

7. Unger ‘The Critical Legal Studies Movement’ 96 Ham LR 561 (1983).

8. Posner Economic Analysis of Law (Boston 3rd edn, 1986).

9. Empimall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523.

10. See Birks Introduction to the Law of Restitution (Oxford, 1989) pp 109–132; Burrows The Law of Restitution (London, 1993) pp 7–16; Beatson, ‘Benefit, reliance and the structure of unjust enrichment’ 40 CLP 71 (1987); Garner ‘The role of subjective benefit in the law of restitution’ (1990) 10 Oxf J Leg Stud 42.

11. The few non-American cases which address the issue of what an ‘enrichment’ is seem to implicitly endorse the idea of ‘money saved II’ as establishing an enrichment. See Luxor (Eastbourn) Ltd v Cooper [1941] AC 108 (no enrichment until goal of employer achieved); BP Exploration Co (Libya) Ltd v Hunt (No 2) [1982] 1 All ER 925; Traders Finance Corp v Macleod [1967] 2 NSWR 204 (whole goal of hire-purchase agreement for hire-purchaser is option to purchase; therefore not enriched by use of car for term of hire-purchase).

12. For an analogous view, see Birks ‘In defence of free acceptance’ in Burrows (ed) Essays on the Law of Restitution (Oxford 1991).

13. For an example of the duty to pay a reasonable sum for requested services which is based on an enrichment of type (1) see British Steel Corporation v Cleveland Bridge & Engineering Co [1984] 1 All ER 504. For an example of the duty based on an enrichment of type (3) see Walsh Advertising Co v The Queen [1962] Ex LR 115.

14. William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932.

15. Brewer v Chrysler Canada Ltd [1977] 3 WWR 69.

16. Kearns v Andree, 107 Conn 181 (1928); see also Minsky's Follies of Florida v Sennes, 206 F 2d 1 (1953); Riley v Capital Airlines, 185 F Supp 165 (1960); Trollope v Koener, 420 P 2d 91 (1970).

17. Leigh v Dickeson (1884) 15 QBD 60.

18. Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880.

19. Coleman Engineering Co v North American Aviation, 55 Cal Reptr 1 (1966) (affd in Earhart v William Law Co, 600 P 2d 1344 (1979)).

20. From this point on in the article ‘the duty to pay for requested non-contractual services performed in the understanding that those services would be paid for’ will only refer to the non-restitutionary manifestations of that duty.

21. Birmingham B District Land Co v London B North Western Railway Co (1887) 34 Ch D 261.

22. Sheffield Corporation v Barclay [1905] AC 392.

23. Sheffield Corporation v Barclay [1905] AC 392, 397.

24. Guaranty Trust Co v James Ruhardron & Son (1963) 39 DLR (2d) 517.

25. Dugdale v Lovering (1875) LR 10 CP 196.

26. See Atiyah Essays on Contract (Oxford 1991) p 293.

27. Yeung Kai Yung v Hong Kong & Shanghai Banking Corpn [1981] AC 787.

48. Birmingham & District Lond Co v London & North Western Railway Co (1887) 34 Ch D 261, 276.

49. McLaren Maycroft & Co v Fletcher Development Co Ltd [1973] 2 NZLR 100; see also Westpac Banking Corp v P & O Containers Ltd (1991) 102 ALR 239.

30. See, in addition to the case cited in the text, Conway National Bank v Pease, 82 A 1068 (1912); Wormrer v Rubinstein, 151 NY Supp 911 (1915); GS Johnson Co v Nevada Packard Mines Co, 272 F. 291 (1920); Peacock v Home, 126 SE 813 (1925); Goodman v Dicker, 169 F 2d 684 (1948); Wheeler v White, 398 SW 2d 93 (1965); Hunter v Hayes, 533 P 2d 952 (1975); Westside Galvanising Services v Georgia-Pacafic Corpn 921 F 2d 735 (1990).

31. Hoffman v Red Owl Stores, 133 NW 2d 267 (1965).

32. Walton Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387.

33. Ibid at 423, per Brennan J.

34. Common wealth of Australia v Verwayen (1990) 170 CLR 394.

35. Hughes v Metropolitan Railway (1877) 2 App Cas 439; Birmingham B District Land Co v London B Northwestern Railway Co (1888) 40 Ch D 268, 286.

36. Ajayi v RT Bsiscoe (Nig) Ltd [1964] 1 WLR 1326; see also Burbey Mortgage Finance d Savings Ltd v Hinhrbank Holdings Ltd [1989] 1 NZLR 356.

37. Combe v Combe [1951] 2 KB 215.

38. Robinson v Harmon (1848) 1 Ex 850, 855, per Parke B.

39. Cullinane v British ‘Rema’ Mfg Co [1954] 1 QB 292, C & P Haulage Ltd v Middleton [1983] 3 All ER 94, CCC Films (London) Ltd v Impact Quadrant Film Ltd [1985] QB 16.

40. Samuel Williston's view; see the famous Williston-Coudert debate, a taste of which can be found in Fuller and Perdue ‘The reliance interest in contract damages’ 46 Yak LJ 52, 64 fn 14 (1936). Williston thought that the facts stated in s 90 of the Restatement (Contracts) outlined a situation in which a breach of promise was a wrong (and that was why it was in the Restatement (Contracts)). Accordingly, the duty arising out of the set of facts described in s 90 was, in the original Restatement, a duty to put the relying promisee in the same position as if the promise had been performed. As should be evident from the text, s 90 in the Restatement 2d takes Coudert's view that the relying promisee should be put in at least as good a position as if he had not relied on the promise. This makes s 90 an incongruous part of a restatement of the law of contract, as Williston well perceived (see on this Birmingham ‘Notes on the reliance interest’ 60 Wash LR 217, 217–245 (1985)). Lon Fuller of course did not recognise the existence of a determinate category of ‘secondary obligations’ and therefore thought that the remedy for a wrongful breach of contract was open to be determined in the discretion of the court according to the rationale for obligations to perform one's promises existing at all. Thus the logic of Williston's position tends to be missed in Fuller and Perdue's article.

41. Walton Stores (Interstate) Ltd v Mahr (1987-1988) 164 CLR 387, 42–27.

42. The wrong is not a breach of a tortious obligation. The pattern of tort duties cannot encompass duties to promote the interests of others, which is the pattern of the duties of someone holding the office of trustee and other fiduciary positions. Fiduciary duties are instances of a sixth common law obligation originating in the acceptance of an office.

43. See Brightman J in Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] 2 All ER 94,96F; see also United States Surgical Corpn v Hospital Products International PQ Ltd [1982] 2 NSWLR 766, 816; Toronto-Dominion Bank v Uhrm (1960) 32 WWR 61.

44. Soar v Ashwell [1893] 2 QB 390, Mara v Browne [1896] 1 Ch 199, Williams-Ashman v price and Williams (1942) 166 LT 359.

45. Lee v Sankey (1872) LR 15 Eq 204. See also A-G v Corporation of Leicester (1844) 7 Beav 176, 49 ER 1031; Andrews v Bousfield (1847) 10 Beav 511, 50 ER 678.

46. Eaves v Hickson (1861) 30 Beav 136; see also Alleyne v Darcy (1854) 4 Ir Ch App 199, Midgley v Midgley [1893] 2 Ch 282, Re Stanley (1922) 53 OLR 670.

47. Re Barney [1892] 2 Ch 265.

48. Now Limitation Act 1980, s 21(3). For a statement of the previous position see McDonnel v White (1865) 11 HLC 570, 11 ER 1454.

49. Nocton v Lord Ashburton [1914] AC 932, 952; Re Collie, ex p Adamson (1878) 8 Ch D 807, 819.

50. Adey Arnold (1852) 2 De G M & G 432,42 ER 940; affd in Wynch v Grant (1854) 2 Drew 312,61 ER 739.

51. To save words, ‘the duty to restore losses to a trust fund resulting from a breach of trust’ will from this point on in the article refer only to instances of that duty which cannot be explained as originating in a wrong constituted by the bringing about of a breach of trust.

54. The Aliakmon [1986] AC 785, 812A-813B, Parker-Tweedale v Dunbar Bank [1990] 2 All ER 577, 582h-583e.

53. See n 42, above.

54. Williams-Ashman v Price and William (1942) 166 LT 359; Fyler v Fyler (1841) 3 Beav 550, 49 ER 216; Lee v Sankey (1872) LR 15 Eq 204.

55. Milne v Mucdonald Estate (1986) 3 RFL (3d) 206.

56. William Lacey (Hounrlow) Ltd v Davis [1957] 1 WLR 932.

57. Re Richmond Gate Property Ltd [1964] 3 All ER 936.

58. Construction Design & Management Ltd v New Brunswick Housing Corpn (1973) 36 DLR (3d) 458.

59. Trollope v Koerner, 470 P 2d 91 (1970).

60. Dugdale v Lovering (1875) LR 10 CP 196, 199.

61. Sheffield Corporation v Barclay [1905] AC 392 (references at 397, 399). Similar language is to be found in Bctts v Gibbins (1834) 2 Ad & E 57 and The Crown v Henrickson and Knutson (1911) 13 CLR 473.

64. Guaranty Trust Co v James Richardson & Son (1963) 39 DLR (2d) 517, 524.

63. Thus the following exchange reported in Walton Stores (Interstate) Ltd v Muher (1987-1988) 164 CLR 387 at 396: ‘Q. If you had been told that exchange of the agreement might not take place, if Mr. Elvy had told you that, would you have gone ahead and done the work? A. Would I have started the work? Q. Yes. A. Of course I would not.’ For examples of the requirement of reliance see Eves v Eves [1975] I WLR 1338; Coombes v Smith [1986] 1 WLR 808; Re Basham [1986] 1 WLR 1498.

64. This follows from the definition of a trustee's duty as one to act loyally in the interests of the equitable owner of the assets he holds. Whatever is done in the interests of the equitable owner therefore cannot be a breach of a duty, a breach of trust.

65. Walker v Symonds (1818) 3 Swan 1, 36 ER 751.

66. Evans v Benyon (1888) 37 Ch D 329.

67. Holder v Holder [1968] Ch 353, 394, 399, 406.

68. Contra, Tyson v Tyson (1901) 1 SR (NSW) Eq 18.

69. Mara Properties Ltd v New Brunswick Liquor Corpn (1977) 18 NBR (2d) 472; see also Nicholson v St Denis (1975) 8 OR (2d) 315; City of Moncton v Stephen (1956) 5 DLR (2d) 722; Curtis v Smith, 48 Vt 116 (1875).

70. Kearns v Andree, 107 Conn 181 (1928).

71. Birmingham & District Land Co v London & NorthWestern Railway Co (1887) 34 Ch D261; see also Vaughan Williams LJ in Bank of England v Cutler [1908] 2 KB 208, Parmley v Parmley [1945] SCR 635.

72. A-C v Humphreys Estate Ltd [1987] 2 WLR 343; see also JT Development v Quinn [1991] 2 EGLR 257, Austotel P & Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582.

73. Gruen Industries Inc v Biller, 608 F 2d 274 (1979).

74. Fyler v Fyler (1841) 3 Beav 550,49 ER 216. The interpretation offered above of this case was endorsed in Alleyne v Dorcy (1854) 4 Ir Ch Rep 199.

75. W Cory & Son Ltd v Lambton B Hetton Collieries (1917) 86 LJKB 401.

76. Affd in Guaranty Trust Co v James Richardson & Son (1963) 39 DLR (2d) 517; see also Parmley v Parmley (1945) SCR 635.

77. Wulton Stores v Mnher (1987-1988) 164 CLR 387; at 413, 421–3, 429 (per Brennan J); and 444, 453 (per Deane J).

78. Olsson v Dyson (1969) 120 CLR 365.

79. Though see Denning LJ in Combe v Combe [1951] 2 KB 215, 220 and, to similar effect, his judgment at first instance in Central London Propety Trust Ltd v High Trees House Ltd [1947] KB 130.

80. See cases cited at n 30.

81. Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424.

82. City of Moncton v Stephen (1956) 5 DLR (2d) 722; see also Brewer v Chrysler Canada Ltd [1977] 3 WWR 69, Kshywieski v Kunka Estate (1986) 21 ETR 229.

83. Wilusynski v Tower Hamlets LBC [1989] IRLR 259.

84. Gilbert & Partners v Knight [1968] 2 All ER 248.

85. See Lee v Sankey (1872) LR 15 Eq 204; A-G v Corporation of Leicester (1844) 7 Beav 176, 49 ER 1031; Andrews v Bousfield (1847) 10 Beav 511, 50 ER 678. The requirement is unaffected so far by the travails of ‘knowledge’ in the distinct areas of liability for ‘knowing assistance’ in a breach of trust and ‘knowing receipt’ of assets disposed of in breach of trust. There is no connection between the different areas. ‘Knowing assistance’ probably deals with liability of accomplices in bringing about a civil wrong (see Birks ‘Civil wrongs: a new era’, in the Butterworth Lectures 1990-1991, London (1991) pp 99–101). ‘Knowing receipt’ is an example of restitutionary liability.

86. The model is the Trustee Act 1925, s 61. Canada and Australia have enacted legislation in each of their local jurisdictions to similar effect: for example, respectively, Ontario Trustee Act s 25 (1980), Trustee Act 1936 s 56 (South Australia).

87. Re Grindley [1898] 2 Ch 593.

88. The standard of conduct for one acting loyally to the interests of the beneficiary of the trust.

89. United States v Western Casualty & Surety Co, 498 F 2d 335 (1974).

90. Farash v sykes Datatronics, 452 NE 2d 1245 (1983).

91. This is not an exhaustive catalogue. Liabilities arising out of fraud, intentional interference with goods (conversion) and the performance of work for another under an ineffective contract can also be explained as giving effect to the duty advanced in this article.

92. B & S Contracts and Design Ltd v Victor Green Publications Ltd [1984] ICR 419.

93. Woolwich Equitable Building Society v IRC [1992] 3 All ER 737.

94. Lloyds Bank v Bundy [1975] 1 QB 326, National Westminster Bank v Morgan [1985] AC 686, Bank of Credit & Commerce v Aboody [1989] 2 WLR 759.

95. Hedley Byrne v Heller & Partners [1964] AC 465, Mutual Life & Citzens' Assurance Co v Evatt [1971] AC 793, Caparo Industries plc v Dickman [1990] 2 AC 605.

96. The reader will have noted that such an alternative understanding of the origin and pattern of both the restitutionary duty and the tortious duty is advanced in those portions of the article which have had to deal with the origin and pattern of either of those duties. It is extremely unlikely that the arguments of the article would be affected by the employment of any other understanding of the origin and pattern of those duties.