- Identify and explain the impact of one piece of case law on these legal forms;
Salomon v Salomon & Co. (1897)
Saloman lent the company £10,000 but it went bankrupt. The debts were £8,000 and the assets that the company still owned were worth £6,000.
The people who were owed money claimed that the £6,000 worth of stock should be used to pay back the £8,000 debt due to them, not to pay back the £10,000 due to Salomon himself.
The end result was that Saloman was considered a distinct entity to his company. He was then granted access to the company’s assets seeing as the loan was in fact a legitimate one.
Limited liability directors can give loans to their company’s and because of precedent, if the company goes into liquidation, their loan can be reclaimed from the company’s assets.
- 3 advantages and disadvantages of each of these possibilities;
Limited Liability
Advantages
- Capital can be raised by selling shares in the company which means the potential for a large capital is quite achievable.
- The company director is separate from the company witch means if he retires or leaves the job, the company can continue trading under the same name.
- Employees can buy a share of the business through shares. This not only provides capital for the company but becomes an incentive for them to work harder to see a larger return on their share.
Disadvantages
- In order for the company to get a loan from the bank, the individuals must give a personal guarantee indicating they can pay it back.
- The company’s accounts are public records and anybody who wants to see them can. This means that competitors will have inside information about the success of the company.
- The running of the company is made even more arduous by the legislation which must be followed and only adds to the load.
Partnership
Advantages
- Forming the partnership can completely be customised to suit the partner’s wants and needs. They are not bound by a terms that they do not agree with as they create them.
- Any risk that perhaps someone like a sole trader would have is spread between three people. This way risks are reduced.
- Three people would bring three points of view of three times the ideas. Everyone would have a unique perspective which would bring greater possibilities and choices to the company
Disadvantages
- Unlimited liability. This is extremely risky to the directors as they could lose their houses, vehicles and possessions if the company goes into liquidation.
- If one partner forgets to order new stock for example, the other partners are equally as responsible. In a partnership all members are equally as liable.
- Everybody has different points of view and when there’s a disagreement between partners, this can lead to internal problems in the company especially if they all have equal shares because only one course of action can be taken but with perhaps 3 different visions.
- Advise Sheridan, Rabina and Darren as to which of these forms best suits their intentions and why.
Their conditions are as follows;
- They have ‘sufficient capital’
- They want to limit control ‘strictly to themselves’
- They want a ‘limit on the amount of capital they can lose’
All of these requests fall under a limited liability company. Condition b) refers to the shares in the business. They can have complete control by selling the shares to themselves. Condition c) is the limited liability. They will only lose the value of their shares and none of their private possessions.
“All relationships between individuals and companies are governed by the ‘rules’ of precedent and statutory interpretation. However, these rules only appear to impose constraints on what judges may do. The truth is that judges can always find ways to develop the law in the directions they desire.”
Discuss the view quoted above. Include in your answer a comparison between the role of judges and that of Parliament in developing the law.
Judges are there to adjudicate on disputes in a fair, unbiased way, applying the legal rules of this country (Martin. J. The English Legal System).
The Judicial Appointments Commission listed five qualities that a judge should have (Martin. J. The English Legal System):
- Intellectual capacity
- Sound judgment
- Ability to deal fairly
- Authority and communication skills
- Efficiency
When considering these, it is evident that judges are not chosen flippantly. There is a great deal of protocol and procedure that they must keep to when they are learning and arguably even more so when fully qualified.
Judges are in place to maintain the law in a just manner. It is because we give them this position of power that they can make these crucial decisions for the benefit and safety of our society. It is very easy to look at a case later and say that a judge has made the wrong decision by not following precedent. However at the time; the judge has to make a decision which is going to be subjective in some cases, even if the law is followed.
Viscount Dilhorne (1971) said,
“The words of a statute must not be overruled by the judges, but reform of the law must be left in the hands of Parliament”
By this he meant that judges cannot take precedence over previous cases which are similar and a decision has been made. It is not up to the judges to change the law, only ensure that it is kept to.
Lower down judges for example magistrate judges have to follow precedent of higher up courts. In the hierarchy of judges, each court has to follow precedent set by its superior. The exception of this is the House of Lords which is the highest in England (apart from European courts). The House of Lords can ignore their previous cases and rule completely differently if they choose to. Because of this hierarchy, judges almost always have to follow precedent.
Laws are created firstly in the form of bills in this order:
- Introduction of the bill to the House of Commons
- Debate on the contents of the bill
- Clause by Clause contemplation of the Bill by committee
- Final debate on the bill
- Monarch approves bill and it becomes an act of parliament.
This makes it quite difficult for a bill to become a law as there are so many stages to go through. What this means is that the laws made are not taken lightly and perhaps not for judges to alter the meaning of as they see fit. Seeing as it is such a meticulous process to pass a law, perhaps it is not for judges to decide what parliament ‘meant’ or ‘intended’ and just follow the laws set.
It is important to observe that parliament can also make mistakes or perhaps introduce general laws that in fact cannot apply to every individual case. This is where judges come into the equation to make sense of the few cases that the law can be open to interpretation. It is called the Purposive Approach when a judge adapts the law to the case. This is practical as it not only personalises cases but fills in any parts parliament may have missed.
This is generally a positive however can lead to judicial decisions rather than democratic ones. This leads to the problem discussed in the quotation. Can judges manipulate the law to make way for what they personally deem as justice?
“Judge can substitute a reasonable meaning to produce a satisfactory result in light of the statute as a whole.” Hart. (2009). Sources of Law.
This is known as the Golden rule. As much as it can be a benefit for a judge to ‘fill in the gaps’, they can be biased and change the meaning of the law to whatever they want to alter the outcome of the sentence. This becomes especially dangerous seeing as the judges have complete power over a member of our society which could indirectly affect us. If it is a criminal who’s set free where they should (by precedent) have been put in jail.
In conclusion, I think that laws of precedent are not just in place to restrain judges. They
References
Hart. (2009). Sources of Law. Available: http://www.slideshare.net/mariettehart/intro-rules-2009. Last accessed 7 April 2010.
Jacqueline Martin (2007). The English Legal System. 5th ed. London: Hodder Arnold. P.242.
Jacqueline Martin (2007). The English Legal System. 5th ed. London: Hodder Arnold. P.246.
