COMMERCIAL LAW AND COMMERCIAL PRACTICE This edited collection brings together leading scholars and practitioners from various jurisdictions with chapters and commentaries coordinated around the theme of alignments and misalignments between commercial law and commercial practice. The purpose of the book is to prompt a more critical and constructive reassessment of current commercial law and its practices, and to instigate a more fruitful dialogue between academics, judges, law reformers and practitioners. The result is a series of provocative and challenging essays addressing an enormous range of problems that are of intimate concern to commercial practice. Some essays focus on broad themes, such as globalisation and trust. Others address more specific issues, such as contract interpretation or constraining modern management. Yet another group targets special prob- lems, such as dematerialisation or super-priority, in order to assess the suc- cess of commercial law in meeting commercial demands. The depth and breadth of issues addressed is a credit to the authors. Taken as a whole, the volume makes some pointed suggestions for improving the practices and processes, and indeed the future progress, of commercial law. Commercial Law and Commercial Practice Edited by SARAH WORTHINGTON Professor of Law, London School of Economics and Political Science OXFORD AND PORTLAND OREGON 2003 Published in North America (US and Canada) by Hart Publishing c/o International Specialized Book Services 5804 NE Hassalo Street Portland, Oregon 97213-3644 USA © The editor and contributors severally 2003 The Editor and Contributors have asserted their right under the Copyright, Designs and Patents Act 1988, to be identified as the authors of this work. Hart Publishing is a specialist legal publisher based in Oxford, England. To order further copies of this book or to request a list of other publications please write to: Hart Publishing, Salters Boatyard, Folly Bridge, Abingdon Rd, Oxford, OX1 4LB Telephone: +44 (0)1865 245533 Fax: +44 (0) 1865 794882 email: [email protected] WEBSITE: http//:www.hartpub.co.uk British Library Cataloguing in Publication Data Data Available ISBN 1-84113-438-4 (hardback) Typeset by Olympus Infotech Pvt. Ltd., India, in Sabon 10/12pt Printed and bound in Great Britain by Biddles Ltd, www.biddles.co.uk Contents Contributors ix Introduction: Aligning Commercial Law and Commercial Practice xi Sarah Worthington Part 1: General Pressures for Change 1. Globalisation: Its Historical Context 3 Ross Cranston, QC MP Commentary: Catherine Newman, QC 2. Commercial Notions and Equitable Potions 29 Sir John Mummery Commentary: Philip Wood 3. Statutory Ingredients in Common Law Change: Issues in the Development of Agency Doctrine 57 Deborah A DeMott 4. Property, Private Government and the Myth of Deregulation 85 Paddy Ireland Commentary: Andrew Whittaker Part 2: Contract Terms and their Interpretation 5. The Intractable Problem of the Interpretation of Legal Texts 123 Johan Steyn 6. The Interpretation of Contracts: Lord Hoffmann’s Re-Statement 139 Ewan McKendrick 7. The Uses of Ambiguity in Commercial Contracts: On Facilitating Re-Bargaining 163 William T Allen and Galya Levy Commentary: Paul Lomas 8. Objectivity and Committed Contextualism in Interpretation 189 Hugh Collins vi Contents Part 3: Adapting Commercial Law to Modern Conditions 9. Documents and Contractual Congruence in International Trade 213 Michael Bridge Commentary: William Blair, QC 10. The Dematerialisation of Money Market Instruments 249 Joanna Benjamin Commentary: Guy Morton 11. Material Adverse Change Clauses After 9/11 305 Richard Hooley 12. Re-thinking Insurable Interest 335 John Lowry and Philip Rawlings Commentary: Sir Jonathan Mance and Adrian Hamilton, QC 13. The Challenge of Modern Bankruptcy Policy: The Judicial Response 373 David Milman Part 4: Commercial Terms for Commercial Ends 14. Damages for Breach of Exclusive Jurisdiction Clauses 403 Nik Yeo and Daniel Tan 15. Interpreting Employment Contracts: Judges, Employers and Workers 433 Simon Deakin 16. Super Priority for Asset Acquisition Financing in Secured Transactions Law: Formalism or Functionalism? 457 Catherine Walsh 17. The Floating Charge—An Elegy 479 Riz Mokal Part 5: Controlling Modern Management 18. Contractual Modification of the Duties of a Trustee 513 Michael Bryan 19. Relieving Directors’ Breaches of Duty 529 Rod Edmunds and John Lowry 20. Enron and the Long Shadow of Stat. 13 Eliz. 565 Douglas G Baird Commentary: Kevin E Davis Contents vii Part 6: Moving Forward: Law and Practice 21. Commercial Law and the Limits of the Black Letter Approach 595 Anthony J Duggan Commentary: David Gold 22. The Legal Academy’s Contribution to the Development of Commercial Law: An Anglo-Canadian Perspective 619 Jacob Ziegel Commentary: Tony King 23. Contracts, Contract Law and Reasonable Expectations 651 Robert Bradgate Contributors PROFESSOR WILLIAM T ALLEN, Nusbaum Professor of Law & Business, New York University, USA, Director NYU Center for Law and Business PROFESSOR DOUGLAS G BAIRD, Harry A Bigelow Distinguished Service Professor, University of Chicago, USA DR JOANNA BENJAMIN, Reader in Law, London School of Economics and Political Science, Member of the Bank of England’s Financial Markets Law Committee, and Consultant at Clifford Chance, London, UK WILLIAM BLAIR, QC, 3 Verulam Buildings, London, UK. Visiting Professor, London School of Economics and Political Science, UK PROFESSOR ROBERT BRADGATE, Professor of Commercial Law, Institute for Commercial Law Studies, University of Sheffield, UK PROFESSOR MICHAEL BRIDGE, Professor of Commercial Law and Dean of the Faculty of Laws University College London, and Director of Legal Research at Norton Rose Solicitors, UK PROFESSOR MICHAEL BRYAN, University of Melbourne, Australia PHILLIP CAPPER, Lovells, London, UK PROFESSOR HUGH COLLINS, London School of Economics and Political Science, UK ROSS CRANSTON, QC, MP, Visiting Professor, London School of Economics and Political Science, UK PROFESSOR KEVIN E DAVIS, Associate Professor, Faculty of Law, University of Toronto. PROFESSOR SIMON DEAKIN, Robert Monks Professor of Corporate Governance and Fellow of Peterhouse, University of Cambridge, UK. PROFESSOR DEBORAH A DEMOTT, David F Cavers Professor of Law, Duke University School of Law, USA, and, since late 1995, the Reporter for the Restatement Third, Agency. PROFESSOR ANTHONY J DUGGAN, Associate Dean and Iacobucci Chair, Faculty of Law, University of Toronto, Canada, and Professorial Fellow, Faculty of Law, University of Melbourne, Australia ROD EDMUNDS, Queen Mary, University of London, UK DAVID GOLD, Head of Litigation and Arbitration, Herbert Smith, London, UK PROFESSOR RICHARD HOOLEY, King’s College, London, UK x Contributors ADRIAN HAMILTON, QC, 7 King’s Bench Walk, formerly Deputy High Court Judge (Commercial and Admiralty Courts), London, UK PADDY IRELAND, University of Kent, Canterbury, UK TONY KING, Head of HR Development, Clifford Chance, London, UK GALYA LEVY, Graduate Fellow, NYU Center for Law & Business, New York University, USA PAUL LOMAS, Freshfields Bruckhaus Deringer, London, UK JOHN LOWRY, Centre for Commercial Law Studies, Queen Mary, University of London, UK SIR JONATHAN MANCE, Lord Justice of the Court of Appeal of England and Wales PROFESSOR EWAN McKENDRICK, Professor of English Private Law, University of Oxford, Fellow of Lady Margaret Hall; Barrister, 3 Verulam Buildings, Gray’s Inn, London. PROFESSOR DAVID MILMAN, CMS Cameron McKenna Professor of Corporate and Insolvency Law, Centre for Law and Business, University of Manchester, UK DR RIZWAAN MOKAL, Lecturer in Laws, University College London; Research Associate, Centre for Business Research, Cambridge University, UK GUY MORTON, Freshfields Bruckhaus Deringer, London, UK SIR JOHN MUMMERY, Lord Justice of the Court of Appeal, UK CATHERINE NEWMAN, QC, Maitland Chambers, London, UK DR PHILIP RAWLINGS, University College London, UK LORD JOHAN STEYN, Lord of Appeal in Ordinary, House of Lords, UK DANIEL TAN, Lecturer in Law, Pembroke College, Oxford, UK PROFESSOR CATHERINE WALSH, Faculty of Law, McGill University, Montreal, Canada ANDREW WHITTAKER, General Counsel to the Board, Financial Services Authority, UK PHILIP WOOD, Allen & Overy, Visiting Fellow at Oxford, Cambridge, QM and LSE, University of London, UK PROFESSOR SARAH WORTHINGTON, London School of Economics and Political Science, UK NIK YEO, Barrister, Fountain Court Chambers, Temple, London, UK PROFESSOR JACOB ZIEGEL, Professor of Law Emeritus, University of Toronto, Canada Introduction Aligning Commercial Law and Commercial Practice SARAH WORTHINGTON HIS COLLECTION OF essays is intended to spark debate. The goal is to promote a better dialogue between academics, judges, law T reformers and practitioners, and to initiate a more constructive reassessment of current commercial law and its practices. Both aspects are crucial if the underlying debates are to have a noticeable and worthwhile impact on legal developments. Early drafts of these essays were first dis- cussed at a two-day round-table seminar held at the LSE in November 2002. That early face-to-face debate was merely a preliminary step in exploring these issues. The published collection will take the ideas to a wider audi- ence. This strategy is becoming increasingly common, although the breadth of the agenda behind this collection is novel. I. RECOGNISING NORMS IN ENGLISH COMMERCIAL LAW All of the essays and commentaries in this collection are coordinated around the theme