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Transplanting Irrationality from Public to Private Law: Braganza v BP Shipping Ltd

Document Cited authorities 1 Cited in Related
Vincent
Pages1-21
Published date01 January 2019
DOI10.3366/elr.2019.0522
Author
Date01 January 2019
INTRODUCTION

A few years ago, two distinguished public lawyers offered their perspectives1 on a phenomenon which both described as an approach by the courts to the control of contractual discretion in private law which derived directly from the more developed, public law, handling of administrative discretion. Although their reactions to the phenomenon differed, what they shared was an interest in this migration of public law reasoning into a private law context. Since then, the case law has expanded and it has, in particular, included the UK Supreme Court case of Braganza v BP Shipping Ltd2 (hereafter “Braganza”), the first in which a (divided) UK top court addressed the issue and raised its profile. The case also, however, raised as many questions as it sought to answer and a reassessment of this phenomenon, still presenting itself at the interface of public and private law, is due.3 This article starts (section B) with a short summary of the views of Professors Oliver and Daintith; summarises the Braganza decision (section C); and considers, in rather more detail, the route taken by the court in Braganza to its own conclusions (section D). Section E contains further analysis of the decision and its consequences and there are some closing thoughts in section F. Running through the article as a whole are the questions of how appropriate it is that courts have adopted the parallel public law reasoning that they have and how justified was the route to that position. There has been a “transplant”4 here, not of substantive law from one jurisdiction to another, but, within the same jurisdiction, of an analytical framework or technique from one class of case to another. Has the transplant “taken”? Does it deserve to do so?

 OLIVER AND DAINTITH

For Dawn Oliver, her interest in “contract and the control of discretion” emerged as an element in a broad project enquiring into “the relationship between public law and private law”, engaging three themes: the fact that public and private law have in common that they are concerned with controlling the exercise of power, whether by the state or by private individuals; that both public and private law are concerned to protect vital interests of individuals and public interests against abuses of state and private power; and that similar theories of government, democracy and citizenship underpin the role of the courts in controlling power and protecting individual and public interests.5

Thus, put simply, Oliver's project was to demonstrate that “although it may be convenient, especially for pedagogical purposes, to draw a distinction between public and private law, in practice public and private law cannot be separated”.6 The pedagogical and other technical and presentational reasons for distinguishing public and private law tend to conceal large areas in which the two overlap and, more importantly, are jointly informed by common theories of democracy and citizenship. In turn, these underpin the adoption by courts of common values – of “individual dignity, autonomy, respect, status and security”7 – in their control of power, both public and private.

In that context, it is unsurprising that Oliver should alight upon parallels already identified between public and private law in relation to the control of discretion in contract in situations in which one party has been given the power unilaterally to vary the contract's terms at his or her discretion. She drew, in particular, upon the writings of Professors Beatson8 and Daintith,9 to the latter of whom we shall return. Oliver noted that Beatson had observed that “contract law has difficulty in dealing with discretion”.10 The starting point had been that discretion granted by contract had initially been treated as unfettered.11 She went on, however, to trace cases12 in which the courts had rendered discretionary powers subject to a degree of control to prevent abuse. Powers should not be exercised either partially or entirely selfishly. Noting that this reflected principles similar to those recognised in judicial review, Oliver identified it as imposing “a private law equivalent of the considerate altruism model of democracy on contracting parties”.13 The common law sought to engender trust. And Beatson had suggested that “contractual discretions have been held not to be unfettered but to be subject to common law principles of procedural propriety (i.e. fairness or natural justice), ‘Wednesbury’ reasonableness (or rationality), bona fides, propriety of purpose, and relevancy”.14 On the other hand, Beatson had confined this approach to only particular situations within the contractual sphere, rather than to contract law generally. Such situations included formal precontractual tendering processes or where one contracting party has power which he is supposed to use to hold the balance between a number of competing interests.15 Oliver noted that Professor Daintith16 saw things differently, in that he had identified specific circumstances in “constitutive contracts” – constitutive of e.g. a club, trade union or a company, in which the “common purpose” of the organisation provided a criterion against which to measure the exercise of discretion – but also other contracts where the courts had relied on the fiduciary position of the controlling group to produce a general obligation to act in good faith, not corruptly, or arbitrarily or capriciously. He had recognised a wider similarity of results across the application of administrative law tests to discretionary statutory power and, on the other hand, of common law tests to contractual power. Oliver saw these remedial parallels as being illustrated in three cases she went on to discuss.17

Daintith's own principal contribution in this area came in his “Contractual Discretion and Administrative Discretion: A Unified Analysis” of 2005.18 As was apparent from Oliver's account, the overlaps between public and private law, as represented, in particular, by the propensity of governments to use the mechanism of contract as a regulatory tool, as a substitute for regulation by “command and control” had been the meat and drink of Daintith's scholarship. Perhaps inevitably, therefore, he was interested in developments which had seen a convergence between private and public case law on a single core technique which he termed “control through decisional standards”.19 What he was anxious to do, in his magisterial survey, was to stress the relevance to an analysis of contemporary phenomena of the historical evolution of both strands of case law and, more importantly, to caution against too readily ignoring conceptual differences between “public law ordering” and “contractual ordering”, leading, in turn, to challenging the distinction between public and private law process. He wanted to argue, however, that identity of method in private and public law review of discretion does not entitle us to assume that there will be parallel trends in the evolution of such review nor that its results will necessarily be identical in parallel cases. Differences of context may override similarities of approach.

Arguing in this way, he deliberately distinguished his position from that of Oliver. His argument, he said, went at once further and less far than Oliver's. It went further in that the cases he drew on20 did not support the limitations she had seen in the application of the similar principles in the two fields. At the same time, his argument was (what he called) “less ambitious” than Oliver's in that “the fact that the identification and control of decisional standards is an approach to discretion encountered across the whole spectrum of sources of discretionary power should make us cautious, rather than confident, about its significance as a mark of the essential unity of these sources”.21 The nature of the judicial task in each case was different.

As he said, the “court in both kinds of case must undertake a process of interpretation and construction of words in their context”.22 For administrative discretion, that context is furnished by the constitutional process through which the rule containing the discretionary power is produced. This, in turn, generates a (fluctuating) relationship between Parliament (the normal source of the rules), the executive and the courts which comes to define the intensity of judicial review from time to time.

This background, reasoned Daintith, bears hardly at all on the context of contractual discretion which, in turn, produces a number of differences in the way courts treat the legal materials before them in radically different contexts, resulting from differences in how to handle uncertainty; the centrality or otherwise of the discretionary power; and the importance of reciprocity between parties. The parallels between the two apparently similar forms of review of discretionary power could be deceptive. There was no reason why the evolution of judges’ attitudes to the discipline of the market and the degree to which it should underpin contract law should correspond to changing judicial attitudes to executive power.23

 <italic>BRAGANZA</italic> – A SUMMARY

It was common ground in Braganza that, in the early morning of 11 May 2009, the chief engineer of BP's MV British Unity was lost at sea in the mid-North Atlantic. Compensation (to his widow24) would be payable, under her husband's contract of employment, unless, “in the opinion of the Company or its insurers, the death … resulted from amongst other things, the Officer's wilful act, default or misconduct”.25 The employing company had formed the opinion that the most likely explanation for Mr Niloufer Braganza's disappearance was suicide and, therefore, that no compensation was payable. In the litigation which followed it was not

the task of this or any other court determining a claim under such a contract to decide what actually happened to Mr Braganza. The task of the court is to decide whether his employer was entitled to form...

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