Gibraltar: "My Lord, This Is An Appropriate Case For You To Exercise Your Discretion..." But How, Why And What If?

Last Updated: 28 November 2016
Article by Nigel Feetham

Both as a legal practitioner and an academic author I have always had a fascinating interest in the judiciary. Every year thousands of court decisions are made around the world. These decisions can affect many aspects of people's lives. And not just ordinary people; judges also sit to hear very many cases concerning companies, commercial disputes, taxation, public bodies and governments. To state the obvious, there are two main systems of law in the world, common law (influenced by English law and which includes Commonwealth countries and former British colonies), and civil law (influenced by Roman law and which includes countries of Continental Europe). As a lawyer practising in the English system of law I do not profess to have much knowledge of the civil law nor indeed of the workings of its judiciary. We can probably say without much controversy, however, that in both common law and civil law legal traditions, the legislature passes local statutes and judges apply them to cases that come before them. When judges adjudicate cases, they therefore do so as an independent and impartial tribunal and 'in accordance with the law'. That at least is the theory. But common law systems allow judges more discretion in developing law, or judicial flexibility in its interpretation, than civil law systems with codified constitutions.

What I find especially interesting as a matter of academic study is how different judges hearing similar cases and applying similar legal principles can see things quite differently. In the research for some of my books, I have often asked myself the question when reading certain judicial decisions whether it is rules, personal views, or a combination of both, that underpins the courts' judgment. Such judge made law has become an important jurisprudential influence in many countries around the world. I also suspect that with the easy accessibility of foreign law reports through a simple Google search, judges are more likely than they might otherwise care to admit to occasionally look for inspiration to other familiar jurisdictions in developing a particular argument.

The How?

Judges may say that their own personal views (perceived or otherwise) have no bearing on their decisions. Others might argue that they do occasionally and inevitably. But the inescapable truth is that outside the courtroom, judges are human beings like any other. They are exposed to the same social influences. It goes beyond the obvious issue of gender and race which can clearly affect how judges make decisions. Indeed, some cases, by the nature of the subject-matter under consideration, can get caught up in the politics of every day life. Politics in this context means 'politics' in its narrow sense rather than interference with the political democratic process itself. No judge could be 'politically partisan' in decision-making. That would make his position untenable. An example in recent years of what might be regarded as inherently 'political' in this context would be the intense global debate surrounding tax avoidance, with some politicians jumping on the moral slogan that "companies must pay their fair share of taxes", a fact which could harden judicial attitudes to tax cases that come before the courts. In my book "Tax Arbitrage" I attempted what some might well regard as the almost futile task of reviewing judicial developments concerned with tax avoidance in a number of jurisdictions to see if there were any discernible influences.

Some cases are also heard against a backdrop of public outcry. Of course such things should not trouble the judicial mind. A case in question was the insolvency of HIH group in 2001, one of the then largest insurers in Australia. The causes for its spectacular failure were laid bare in the report of the independent Royal Commission of enquiry, headed by The Hon Justice Owen (a very able and experienced senior judge). After the publication of the report and following a long and painful regulatory process, certain former directors were disqualified by the Australian prudential regulator. Against this background of intense public criticism, three directors successfully challenged the disqualification order. The Appeals Tribunal, after considering all the evidence presented to it, did not give the regulator's views greater deference than it considered necessary. No doubt, mindful of human frailty, in one of the cases the Appeals Tribunal noted that "no person is without flaw, and the fact of some errors of judgment does not necessarily amount to a lack of fitness". It is a human sentiment that must resonate with many people.

Whilst one would not usually question how judges make findings of fact, it is in the interpretation of matters of fact that judges retain their most powerful discretion, especially where judges make policy decisions. For example, in cases where they are not unduly constrained by statute, a sympathetic judge may rule in favour of a party to litigation simply on his (a word intended to be used in a gender neutral way) consideration of the evidence before him and his interpretation of the law. Indeed, a judge may even be critical of a party's conduct but still find in his favour. Sometimes reading a judgment and the reasons for the court's decision, one is left with the impression of an unwritten underlying desire by a court to find in favour of one party as opposed to the other. A court judgement can contain lengthy factual and legal analysis but it may also communicate its findings and conclusions with surprising brevity: it could be as simple as "having regard to the findings I have made, I conclude..." (or similar phrase). Some legal practitioners may think this is not a sufficient reason. But there is no obligation on a judge to give more extensive reasons for his decision, in much the same way as senior counsels' written opinions are often strikingly brief in arriving at a conclusion. After all, a decision is a court's view of the evidence and its interpretation of the law and by its nature it is a conclusion which a different judge, sitting on a different day and presented with the same evidence, could disagree with. Indeed, that could well also happen on appeal.

Even in the most controversial cases, a court is unlikely to be indifferent to human suffering and on occasions whilst not admitting it, a judge is likely to weigh up in his mind the policy reasons for deciding a case one way or the other. In other cases, a judge's hands could be tied by an impressive number of authorities (e.g. established case-law that is pro-creditor and therefore pro-plaintiff) and the court is compelled to find against a party with some regret and no little sympathy. The real challenge for practitioners here must be how to present the case before the court in a manner that takes into account any inherent bias or prejudice (depending from what angle one is looking at it). Of course, when politicians themselves consider that judges have got it wrong, it is open to the local legislature to bring about a change of law through a change of legislation.

Further, when a judgment of the court is first delivered, the parties, and their respective lawyers, will read every word carefully, often as one would have read the pronouncements of an ancient oracle. They may then decide to appeal the decision. Often cases that go on appeal are overturned by the higher courts on narrow points of law. On other occasions, the higher court may even rebuke the judge of the lower court. What allows a court to do so is no different to the inherent 'discretion' that allows a judge to arrive at the decision in the first place, subject to the constraints of the system of judicial precedent.

An area of law where judicial attitudes may differ markedly, depending on whether one is looking at a case from the perspective of the geographical origin of the judge, is trusts. One has to approach this topic recognising that whilst the concept of the trust is well established in the English system of law, the use of trusts can at times be the cause for some emotive debate. More often than not, an 'onshore' judge considering a wholly domestic case (i.e. one with no foreign element) would, save for the usual intricacies of the law, find it an uneventful experience. But add an 'offshore' element to the case, and the scenario potentially changes from what might be regarded as an uncontroversial application of the law to a less than straightforward question. For instance, courts do not always go to the same length to respect the validity of an 'onshore' trust as they do an 'offshore' trust. Whether foreign courts are more likely to disregard a trust for domestic tax purposes or in matrimonial proceedings where there is an 'offshore' element may well depend on whether they view the arrangements as a 'sham' (a legal concept which itself is fraught with difficulty and much subjectivity). This remains an area of contention in 'offshore' jurisdictions around the world where questions of public policy are different to what they are in onshore jurisdictions. The Chief Justice of the Cayman Islands (Chief Justice Anthony Smellie) has often called for a debate on this, in one keynote address noting "I have considered it important to write and speak extra-judicially about our work in relation to offshore business. I find that if we don't speak for ourselves, what we do becomes defined by others, in particular our onshore detractors. It therefore becomes a matter of protecting the reputation and integrity of our administration of justice."

It is not possible in a short article to undertake a detailed review of recent judicial developments in and between some common law jurisdictions. But I would like to highlight two that I am particularly interested in.

One area of judicial development in recent times that I have found most interesting concerns the burning issue of fiduciary duties brought about by multi-jurisdiction Madoff related litigation, where the question naturally arises, how broadly or narrowly will judges in different jurisdictions view fiduciary duties. The recent judgment of the English High Court in Madoff Securities International Ltd v Raven and others [2013] EWHC 3147, following the David and Goliath litigation between the Madoff liquidator and various defendants (mainly former directors), may have surprised some commentators but remains a warning shot for those with deep pockets that pursue claims against a background of fraud without careful consideration. In thewords of Mr Justice Popplewell "I cannot forbear from recording the commendable dignity and restraint which I have observed in each of [of the defendants] throughout the trial. Bernard Madoff's fraud itself blighted their lives and tainted their good names simply by association, quite apart from the financial losses suffered by some from investments in the Ponzi scheme. To this was added the burden of this unfounded claim, making serious allegations of dishonesty, which threatened financial ruin and personal humiliation." I think that the highly readable judgment of Justice Popplewell could set an important English precedent for the future. But I also suspect its influence may extend beyond British shores (but probably not quite as far as America).

An equally fascinating line of cases in America since the financial crisis are concerned with regulation where enforcement action comes for consideration before the courts, with different judges taking a different approach to enforcement policy and its consequences. This has become especially controversial in the US in the context of regulatory sanctions and settlements entered into by the SEC with large banks (a subject that has raised strong public feelings). In a surprisingly short Opinion (which some observers have noted took the court more than a year to write) the Court of Appeals for the Second Circuit in New York very recently rebuked Judge Rakoff's decision, the subject of appeal, saying "the district court abused its discretion by applying an incorrect legal standard." The case was United States Securities and Exchange Commission v Citigroup Global Markets Inc (decided 4 June 2014). Judge Rakoff (a distinguished judge and something of a media darling) has become one of a growing number of US 'activist judges' (a term judges would not themselves usually openly approve of) willing to challenge conventional wisdom. As other cases from the financial crisis of 2008 wash through the courts (whether as a result of civil or criminal proceedings), it remains to be seen what legal standards are applied by the courts to these cases and what influence this could have on other jurisdictions.

The Why?

Nothing I have said in this article has probably not already been said before. Some commentators, including judges themselves (such as Judge Richard Posner, one of the intellectual powerhouses of the American judiciary), have even been more forceful. It raises the question, what are the possible academic explanations for judicial behaviour?

Whilst I was putting the finishing touches to this article, in one of several hours I spend every day reading news and materials online, I came across a headline from The New York Times "Another Factor Said to Sway Judges to Rule for Women's Rights: A Daughter."(16 June 2014). It pointed out that a new study conducted by two academics concluded that judges with daughters are more likely to vote in favor of women's rights than ones with only sons. The article also provided the link to a copy of the study. The study considered about 2,500 votes by 224 federal appeals court judges. It concluded that "Having at least one daughter corresponds to a 7 percent increase in the proportion of cases in which a judge will vote in a feminist direction." Moreover: "Having one daughter as opposed to one son is linked to an even higher 16 percent increase in the proportion of gender-related cases decided in a feminist direction." Whilst this is not the first study of its kind (as the authors themselves acknowledge), it is the first study concerning the effect of having daughters on the votes of the judges. Taken together with other studies, the results of this latest study "suggest that existing theories of judicial politics need to be expanded." The authors concluded that "Decision making can be predicted by a theory that relies on (1) law and partisanship, (2) strategy, (3) identity, and, as we show in this article, (4) personal relationships and experiences."

And the What if?

This leads me to a question I also wanted to raise in this article. Using predictive analytics, could one develop a sophisticated computer model as a guide to judicial behaviour? Many financial companies have constructed (and indeed are required by their regulators to use) models to 'guide' their investment decisions in the financial markets and regulatory capital needs. Models are also often used to explain how the financial markets work. In more recent times, financial institutions in particular have used models to more accurately assist with pricing decisions (e.g. how to assess the risk in the sale of an insurance or mortgage product relative to an individual's risk profile). Every actuary will tell you that the key to better understanding the irrationality of financial markets is the availability of historical data. But the accuracy or otherwise of all models depend on the assumptions and parameters set by those who construct them. Change a particular assumption or parameter and you change the outcome. By its very nature, no model can therefore ever be completely accurate.

So in answer to our question, in theory, yes. It must be possible, for example, to model cases previously decided by a judge (such as the number of cases upheld or overturned on appeal). It must also be possible to attempt to model human behaviour for a judge like that of any other person based on a number of known personal factors (assuming we had the necessary data to support a judge's personality from publicly available sources such as online information). That is exactly what the 'daughter effects' study shows. In addition, if the computer running the model could be programmed to analyse language in previous court decisions to predict personality traits, this could also provide an insight into decision-making. If words, like eyes, can be the window into a person's soul, in court decisions we have a large amount of personal data (writing). But one would have to approach this with the same degree of caution as one would any model since at the end of the day this would be less about predicting than it is about analysing human behaviour as a guide to decision-making. Like in many aspects of financial, risk and capital modelling, the actual result could be wholly unpredictable because human behaviour (itself conditioned by many factors) is not only uncertain but also impacted by future unforeseen circumstances. What such a model would allow parties in litigation to do is to adapt their strategy (e.g. to settle or not as the case may be) according to the outcome. Even with the inherent uncertainty of litigation, most cases only go to court on the basis that each party's legal team believes his client has,based on the evidence, a better than even chance to win (or to obtain an advantage) in court proceedings. A model that shows an increase or decrease in the relative probability of success (even on the basis of small percentages, which is what this would be) could provide an interesting tool for lawyers involved in litigation.

The certainty of uncertainty

However, one thing is certain and that is that in the final analysis no model is a substitute for personal judgment. Ironically, it is the same degree of personal judgment that a judge could display in his own decision-making process. To remove personality characteristics, gender, race, social and even political influences, from any decision-making process would be to wipe out ten thousand years of human experience. Whilst there might still be those who argue it is right to remove such influences from judicial behaviour, if we did so, the ultimate evolution of the judicial system (albeit, not in the near future) might well be to place judicial decision-making itself in the hands of a supercomputer. Having spent very many enjoyable hours throughout my working life reading the court decisions of some of the most brilliant minds in legal history, I could not countenance such a thought!

www.gibraltarlaw.com

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