Abstract

In April 2014, leading scholars came to China to deliver lectures addressing fundamental areas of the common law, including property law, agency law, equity, criminal law, and tax law. These lectures explore the development, features, and application of their respective areas of the common law. In addition, the lectures compare aspects of the common law with the approach in civil law jurisdictions and, in particular, in China. By examining the development of the common law and stare decisis, one may gain insights into common law concepts, many of which are similar to those in the Chinese legal system.


I. Introduction

In April 2014, a lecture series was hosted in China exploring several areas of the common law. Two teachers from each of the following law schools: Melbourne Law School, National University of Singapore Faculty of Law, and University of Oxford Faculty of Law delivered the lectures. Their visit was made possible through the generous support of Allan and Maria Myers and four Chinese law schools: Tsinghua University School of Law, Peking University Law School, Fudan University Law School and KoGuan Law School of Shanghai, Jiaotong University.

For the purpose of recording some of these lectures for future reference, and also as an expression of appreciation, we have decided to publish five of these lectures. The lectures address five fundamental areas of common law: property law, agency law, equity, criminal law, and tax law. Each lecture may be read together with the other lectures or separately.

These lectures explore the development, features, and application of their respective areas of the common law. In addition, the lectures compare aspects of the common law with the approach in civil law countries and, in particular, in China. Various themes emerge from the lectures in terms of the common law. Four of these themes are explored below.

A. The Definition of “Common Law” Depends on the Context

When developing an understanding of the common law, law students and lawyers from other legal systems face certain challenges. One of these challenges is determining what the term “common law” actually means and how the term is used. It is important to note that there are at least three contexts in which the term may be used:

(1) When comparing legal systems between countries: to refer to the legal system that emerged in England and to distinguish it from other legal systems, such as the civil law system that emerged in continental Europe and China’s own distinctive legal system (for insights into this, see the lectures by Gans, Godwin and Tan);

(2) When comparing sources of law within common law jurisdictions: to refer to case law (i.e. law made by judges when they decide cases) and to distinguish it from statute law that is enacted by Parliament (for insights into this, see the lectures by Gans, Godwin and Simpson);

(3) When comparing sources of case law within common law jurisdictions: to refer to the body of case law that was originally made by judges in the “common law courts” and to distinguish it from “equity”; namely, the body of law that was made by judges in the “courts of equity” (for insights into this, see the lectures by Davies and Godwin).

As a result, an understanding of the context is very important to an understanding of how the term is used.

B. Case Law (Judge-Made Law) is a Source of Law in its Own Right

In common law jurisdictions, the role of case law as a source of law is underpinned by the doctrine of precedent – also known by its Latin name stare decisis, which literally means “to stand by the decision”. According to the doctrine, courts must abide by the decisions of higher courts and must not overturn their own precedents without good reason. In fact, it was only relatively recently in the history of English common law – 1966 – that the Supreme Court of the United Kingdom (formerly, the House of Lords) expressly decided that it was not bound by its previous decisions.

Although the doctrine of precedent does not apply in China, the referential value of case law has become greater as a result of the adoption of a guiding case system by the Supreme People’s Court in 2011.

To understand how the doctrine of precedent works, it is essential to bear in mind that it is not the decision in its entirety that is binding. It is the legal reason or legal principle on which the decision was based that is binding. This is often referred to by the Latin phrase ratio decidendi, which can be translated as “the reason for what was decided”. In addition, when hearing a case, a court will only be bound to follow the decision in a previous case if the facts of the current case come within the scope of what was contemplated by the ratio decidendi of the previous decision. If the facts do not come within the scope of the ratio decidendi, the court will distinguish the previous decision “on its facts” and, although it might be persuasive, the previous decision will not be binding.

It is also important to note that any statements made by a judge that do not form part of the ratio decidendi are not binding, although they might be persuasive. Such statements are referred to by the Latin phrase obiter dicta (literally, “statements in passing”).

As noted by Davies in his lecture, it is often difficult to identify the ratio decidendi of a case and debate about legal principles has been the subject of many appeals and academic commentaries over the years. This is perhaps one of the greatest disadvantages of case-law. At the same time, it could be argued that it is also one of its greatest strengths, as it permits legal principles to be adapted to meet the circumstances of specific cases.

The use of case law as a source of law (i.e. in addition to statutes enacted by Parliament) has certain advantages and disadvantages. One of the advantages is that the common law can be developed incrementally by courts as and when disputes arise, and does not require a statute to determine or confirm the legal position. This imbues the law with a high level of flexibility and the ability to adapt quickly to new circumstances. This is particularly advantageous to commercial transactions, where the courts in common law jurisdictions have traditionally demonstrated a pragmatic approach that attempts to balance transactional efficiency with the need to achieve fairness between the parties, including third parties. The issues discussed by Godwin and Tan illustrate the pragmatic view of the common law as it seeks to achieve an appropriate balance between persons who have competing claims or interests and also the importance that the common law attaches to achieving certainty and stability in commercial transactions.

On the other hand, one of the disadvantages with the use of case law as a source of law is that in its attempts to achieve certainty and stability, it may not always adopt the most logical approach. This is illustrated by Tan, who discusses issues concerning agency law and the retrospective effect of ratification. In addition, it may leave certain issues unresolved or unsettled, as explained by Godwin in relation to the effect of contractual restrictions on the assignment of debts.

Further, certainty and stability may be undermined if a decision by the highest court in a common law jurisdiction reinterprets or overturns established doctrine without any advance warning. This is illustrated by Davies, who notes that the Supreme Court of England and Wales has recently held that a fiduciary holds a bribe on constructive trust for the beneficiary. It is in such circumstances that it may be necessary for Parliament to enact a statute to clarify or override the position under case law.

Even where the field is substantially covered by statute such as in the case of criminal law and taxation, judges still have a crucial role in interpreting the law and applying it to new situations. In doing so, judges continue to make law that either plugs gaps left by statute or supplements existing statutory provisions. This is illustrated by Gans, who examines the emergence of statutory offences to replace the old common law crimes and notes that in many common law jurisdictions, statutes are still read by courts in special ways that reflect the approach of past judges to criminal responsibility. It is also illustrated by Simpson, who examines the often-controversial interplay between the judicial and legislative roles in analysing and responding to the challenges posed by tax avoidance activities. In particular, through an examination of case law, Simpson highlights the challenges that courts face when they interpret a taxation statute and endeavour to give effect to the intention of Parliament by identifying the statutory question that they have to answer and the facts that are relevant to determining how the statutory question is to be answered.

C. Equity Performs a Vital Role in Common Law Jurisdictions

As explained by Davies, the body of law that is called “equity” was originally developed by the judges in the Chancery courts to “to soften and mollify” the harshness and inflexibility of the law developed in the common law courts. Although law and equity are now administered by the same courts as a result of statutory developments in the nineteenth century, equity remains a separate body of law and, like the common law, is developed by judges in a principled, incremental manner.

Equity is crucial to understanding fundamental aspects of common law systems. Perhaps the best example of this is the use and operation of the trust. Described by some as “England’s greatest contribution to legal science”, the trust performs a pivotal role in terms of the way in which transactions are structured and proprietary rights are recognised and protected.

The relevance of the trust is illustrated by Godwin, who examines the circumstances in which a proprietary right or interest is recognised on the basis of a trust. It is also illustrated by Davies, who examines the nature of a fiduciary duty that a trustee owes to the beneficiaries and the question as to whether a proprietary remedy based on a trust is available where there is a breach of that duty.

D. Although Distinctive in its Origins and Development, the Common Law Often Simply Represents an Alternative Way of Achieving the Same Result as in Other Legal Systems

The distinctiveness of the common law, when compared with other legal systems, often masks an underlying reality; namely, all legal systems must deal with similar challenges and design solutions to overcome those challenges. Sometimes the result is exactly the same and the only difference between legal systems is the method used to arrive at the result.

This reality is illustrated by Gans in response to the question “who decides whether to start a criminal prosecution?” Gans notes that both the common law and civil law systems reach a similar answer; namely, the decision is made by a protected decision-maker with independence from the government. In civil law systems, that decision-maker is a court or a court officer. In common law decisions that decision-maker is now typically an independent public prosecutor.

Importantly, Gans also notes that attention to tradition is necessary for a full understanding of criminal law in common law jurisdictions. This is a common theme that runs through all of the lectures. The relevance and importance of tradition should come as no surprise when it is realised that the common law has evolved incrementally and uninterrupted for almost one millennium.

We hope that these lectures will prove useful to students in China and to others who would like to gain a better understanding of the common law and its rich and diverse traditions.