European Court of Human Rights defers to traditional UK common law

16 December 2011 by

OBG Ltd et al v. United Kingdom, 29 November 2011

We have become quite used to the Strasbourg Court having a serious go at bits of our statutory law, whether it be prisoners’ rights, anti-terrorist legislation or housing law. A lot of this statute enables the state to do things to private citizens which may or may not offend the Convention. But what is rather rarer in Strasbourg is the case where an applicant challenges judge-made law or common law, and does so where the dispute is between two private parties. Perhaps the best known example is the MGN/Naomi Campbell case in which privacy and costs issues got an intense scrutiny from the Strasbourg Court.

OBG sounds much less glamorous and more obscure, but is nonetheless interesting. The human rights of companies which have been injured by the wrongful exercise of administrative receivership powers have not been minutely examined in the case law, to say the least. But if this case sounds dry, and likely to hoist me by my own petard (should lawyers get named and shamed for being boring?), bear with me. Because it is actually quite a sad story of people being dealt an unjust result – for which neither domestic  nor Strasbourg courts felt able to fashion a suitable remedy.

The applicant, OBG, was, by all accounts, a successful construction company in the North West of England. It derived most of its contracts from North West Water. But then it fell out with NWW. This meant it could not pay its sub-contractors, Centriline, to the tune of over £1m. Centriline was advised, wrongly, by its solicitors that they could appoint receivers over OBG’s assets to pay its debt. In 1992, the receivers directed OBG’s workforce to shut up shop. The receivers realised OBG’s assets, raising just over £1m, including a rather limited deal with NWW in respect of its contractual claims. This  repaid Centriline’s debts – but nothing more. OBG still owed £4m to others.

OBG then sued Centriline’s solicitors, Centriline itself having gone into liquidation. Centriline’s solicitors then put their hands up – yes, we were negligent. But the upshot of a long and tortuous route  up the court system was that OBG did not recover full damages for what they lost because they had wrongly been put into adminstrative receivership. In 2007  (not fast moving litigation, this, given that the receivers had intervened in 1992), the House of Lords dismissed OBG’s appeal. The judge at first instance had given OBG damages for the losses incurred because a better deal should have done with NWW. The higher courts disagreed. The grounds are technical. OBG were suing in tort. It said that the receivers had “converted” OBG’s property, in ordinary-speak, wrongly taken it. The higher courts said that the rules about conversion (in this case enshrined in statute, albeit deriving from aged common law principles) did not allow recovery for interference with intangible assets. The curious anomaly was that if you took a cheque, you could be liable – the cheque was a real thing, a piece of paper. But if you took the debt underlying the cheque, you were not liable -it was intangible. Odd that, given that the piece of paper which is the cheque is of rather less interest to most of us than the underlying money which will come our way when we cash the cheque. Ah well, such is the oddity of the the common law.

I  am afraid that the other claim brought by OBG is even more abstruse. OBG said that the receivers had wrongly interfered with the contractual relations between OBG and NWW. The higher courts said, yes, they had, but that this was not enough unless the receivers had had equally some intention to cause loss or damage to OBG. Given that the receivers had acted in good faith (albeit on dud advice), there was no claim.

The interest of the case is Strasbourg’s take on it. No prizes for guessing that OBG said that their Article 1 Protocol 1 claims in respect of their possessions had been interfered with. But remember that the defendants were not public authorities. So the claim had to be that UK law determining the case between these private parties was not Convention-compliant because it did not sufficiently protect OBG’s A1P1’s rights to its own property.

This was a bridge too far for Strasbourg. It declared the application inadmissible. It accepted that the value of the contracts was a posession for A1P1 purposes. OBG said that the UK was in breach of its negative obligations (not to offend A1P1), and of its positive obligations (to make sure that A1P1 was not offended). In both instances, the Strasbourg Court quailed at deciding that the highly complex rules of domestic tort law offended A1P1. In each case, OBG was arguing that there was a duty on the courts (and hence on the UK) to develop the anomalous rules of tort so that entities in its position could claim the losses which in fact had flowed from the wrongful interposition of the receivers. But the domestic courts and Strasbourg said no – there are underlying good reasons why the line is drawn as it is, even though OBG fell foul of it, and lost over £1m thereby.  Strasbourg expressed itself in rather formulaic terms. Limiting the liabilities of third parties such as receivers to OBG was in the general interest.

The core of its conclusion is contained in paragraph 92:

In such a complex area of private law, it is not the role of this Court to second guess the House of Lords’ conclusion, or  indeed to weigh the competing arguments for and against such a development of the common law.

Hmm. The Strasbourg Court feels no such compunction in putting its oar in firmly in other complex areas. But perhaps the key is in the fact that this was a private law dispute, with one private party suing another, and the Court, somewhat unfamiliar with the refinements of UK company law, felt (unlike prisoners or alleged terrorists) insecure in weighing in – despite the apparent injustice of it. So discretion was the better part of valour.

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  1. Stephen says:

    Isn’t the major point here that the Court was asked to rule in relation to two private entities? The ECHR is about the relationship between the State and private entities, including companies it seems.

  2. An interesting case – thanks. Perhaps this shows Strasbourg’s relative lack of interventionism in A1P1 cases compared to cases involving other rights, and perhaps to some extent anxiety on the court’s part not to repeat its experience in the Osman/Z v UK cases, where the ECtHR had to row back on its initial view of negligence law, once it understood it.

  3. Stephen says:

    Yes, I get the gist of this even I am not a lawyer.

    It seems odd to me that a company, although a legal person, should have human rights. Does the application of the ECHR to companies stem from the ECHR itself or has the UK legislature, via the HRA , decided that the Convention should apply?

    In either case, I see logical problems with applying Convention rights to companies.For example, can Article 8 apply when it is not obvious that a company can have a family or private life?

    If a right to life is enshrined in the ECHR then logically it should not be permissible to have forced winding up procedures in law because such procedures deprive a company of its existence.

    Doesn’t the application of the Convention give companies the right to vote in general and local elections?

    Hayek, the Austrian political economist, believed that private enterprise provides the best mechanism to keep the State in check. Is the granting of human rights to companies a mechanism to give effect to Hayek’s proposition? His proposition arose from observing how the Nazi State subordinated private firms to the Nazi programme (including the production and supply of Zyklon B gas by IG Farben)?

    I am possibly parading a high degree of ignorance with these questions but I wonder if anyone else has the answers.

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