By the end of this session you should be able to:

 Defined law in relation to business

 Type of Law
 Distinction between civil and criminal law
 Court system
o Jurisdiction of each court
o Appeal system
o Personel
 Tracking and Case management

Human society has developed over thousands of years from a primitive culture where the very
survival of the species was at stake to the complex, diverse and dominating species that
humans are today.

Much of the success of this development can be attributable to rules and regulations laid down
by society. With a little further study the need for such rules becomes clear.

Social order, created by rules is at the foundation of the society that we see today. The
framework that was created influences how individuals interact and how businesses operate.
In other words, it provides social control.

The framework of social control can be viewed as having two aspects:

􀁸 Formal control mechanisms

􀁸 Informal control mechanisms

Law is a formal control mechanism. It provides a structure for dealing with and resolving
disputes that may arise, as well as providing some deterrent to those wishing to disrupt social
order.

Informal mechanisms include ethical and moral guidance. These are 'norms' or behavioural
expectations that society has developed over time through its culture. Such mechanisms have
little formal structure to organise, control or to punish – such matters are dealt with informally
by pressure from other individuals or groups.

The definition for law given by David Kelly, Ruth Hayward and Ann Holmes is:

'Law is a formal mechanism of social control',

Salmond:
“Law consists of any principle which is recognised and enforced by the courts in the
administration of justice”.

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Another, which is possibly superior to that of Salmond, since it has a slightly wider application,
is that of James:

“A body of rules for the guidance of human conduct which are imposed upon and enforced
among the members of a given state”.

Law is also defined as a system of rules that a society or government develops in order to deal
with crime, business agreements, and social relationships. You can also use the law to refer to
the people who work in this system. They are seeking permission to begin criminal proceedings
against him for breaking the law on financing political parties...

Business law consists of the enforceable rules of conduct that govern commercial relationships.
In other words, buyers and sellers interact in market exchanges within the rules that indicate
the boundaries of legal business behavior. Constitutions, legislatures, regulatory bodies, and
courts spell out what market participants may or may not legally do.

Understanding business law is necessary for future businesspeople because there simply is no
market transaction that occurs outside legal guidelines. All contracts, employment decisions,
and payments to a supplier are limited and protected by business law. Each of the six functional
areas of business—management, production and transportation, marketing, research and
development, accounting and finance, and human resource management—sits on a foundation
of business law.

Types of law

The English legal system distinguishes several different types of law.

􀁸 Common law and equity

􀁸 Statute law

􀁸 Private law and public law

􀁸 Criminal law and civil law

Common law and equity

The earliest element of the English legal system is common law, a system of rigid rules laid
down by royal courts following the Norman conquest. Application of law was by judges who
travelled around the country to keep the King's peace and judgments often resulted in harsh
consequences.

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The judges actually made the law by amalgamating local customary laws into one 'law of the
land'.

Remedies under common law are monetary, and are known as damages.
However, there are times when money is not a suitable remedy. For example, you have agreed
to buy a unique painting from an art dealer. Should the dealer at the last minute sell the
painting to someone else, damages are unlikely to be acceptable, after all you wanted that
painting.

Equity was developed two or three hundred years after common law as a system to resolve
disputes where damages are not a suitable remedy and to introduce fairness into the legal
system.

Statute law

Whilst the judiciary is responsible for the creation of common law, Parliament is responsible for
statute law. Statute law is usually made in areas so complicated or unique that suitable
common law alternatives are unlikely, or would take an unacceptable length of time, to develop
– company law is one example of this. We shall be studying statute law as a source of law in the
next chapter.

Private law and public law

Most of the law that you will be studying is private law. That is law which deals with
relationships and interactions between businesses, and private individuals, groups or
organisations.

The state provides a framework for dealing with disputes and for enforcing decisions, but it is
for individuals to handle matters between themselves. For example, the Sale of Goods Act 1979
regulates the sale of goods. It provides rules that must be adhered to when making a sale.
Should any dispute arise that is covered by the act, it is up to the parties to resolve the matter
themselves using rules laid down by the legislation, the state does not get involved.

Public law is mainly concerned with government and the operation and functions of public
organisations such as councils and local authorities. It will not be of great interest to you in
your studies of corporate law, however examples of public law can be found in planning rules
that must be adhered to when building or expanding offices.

A key distinction between public and private law is who takes up the case when a wrong is
committed.

The state prosecutes the alleged perpetrator under public law, whereas, under private law it is
for the individual concerned to take action.

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Criminal and civil law

The distinction between criminal liability and civil liability is central to the English legal system.

It is often the criminal law about which the general public has a clearer perception and keener
interest.

Civil law, on the other hand, receives less overt media coverage. However, every time you buy
or sell goods, or start or finish an employment contract, your actions, and those of the other
party, are governed by civil law.
FAST FORWARD
The distinction between criminal and civil liability is central to the English legal system and to
the way the court system is structured.

Criminal law

Criminal law is a part of public law.

In criminal cases, the state prosecutes the wrongdoer. A crime is conduct prohibited by the law.

In a criminal case the State is the prosecutor because it is the community as a whole which
suffers as a result of the law being broken. Persons guilty of crime may be punished by fines
payable to the State, imprisonment, or a community-based punishment.

Generally, the police take the initial decision to prosecute, but this is then reviewed by the
Crown Prosecution Service. Some prosecutions are started by the Director of Public
Prosecutions, who is the head of the Crown Prosecution Service.

In a criminal trial, the burden of proof to convict the accused rests with the prosecution, which
must prove its case beyond reasonable doubt.

Civil Law

Civil law exists to regulate disputes over the rights and obligations of persons dealing with each
other and seeks to compensate injured parties.

Civil law is a form of private law. In civil proceedings, the case must be proved on the balance
of probability. The claimant must convince the court that it is more probable than not that
their assertions are true.

There is no concept of punishment, and compensation is paid to the wronged person.

Both parties may choose to settle the dispute out of court should they wish.

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Terminology in civil cases is different to that of criminal cases. A claimant/ Plaintiff sues a
defendant. A civil case would therefore be referred to as, for example, Smith v Megacorp plc.

One of the most important areas of civil liability for business, and accountants in particular, is
the law of contract.
Distinction between criminal and civil cases

It is not an act or event which creates the distinction, but the legal consequences. A single
event might give rise to criminal and civil proceedings.
Illustration
A broken leg caused to a pedestrian by a drunken driver is a single event which may give rise to:

􀁸 Criminal case (prosecution by the State for the offence of driving with excess alcohol), and

􀁸 Civil case (the pedestrian sues for compensation for pain and suffering).

The two types of proceedings can be easily distinguished because three vital factors are
different:

􀁸 The courts where the case is heard

􀁸 The procedures

􀁸 The terminology
FAST FORWARD
In criminal cases the rules of evidence are very strict. For example, a confession will be carefully
examined to see if any pressure was brought to bear upon the accused, but an admission in a
civil case will not be subjected to such scrutiny.

Example of a Criminal and civil law incident

While on a sales trip, one of your employees is involved in a car accident. The other vehicle
involved is damaged and it is alleged that your employee is to blame. What legal proceedings
may arise as a result of this incident?
Answer
Your employee may be guilty of a driving offence such as careless driving. The police, to whom
the incident should be reported, will investigate, and if the facts indicate a driving offence, they
will prosecute him. The owner of the damaged vehicle (or his insurers) may sue the driver at
fault in civil proceedings to recover damages.

The system of courts

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The courts have to be organised to facilitate the working of the legal system. There are four
main functional aspects of the court system which underlie its structure.

(a) Civil and criminal law differ so much in substance and procedure that they are best
administered in separate courts.

(b) Local courts allow the vast bulk of small legal proceedings to be decentralised. But
important civil cases begin in the High Court in London.

(c) Although the courts form a single system and many courts have a general civil jurisdiction,
there is some specialisation both within the High Court and in other courts with separate
functions.

(d) There is a system of review by appeals to higher courts.

The civil court structure

The civil court structure comprises the following.

 Magistrates' courts mostly deal with small domestic matters.
 County courts hear claims in contract and tort, equitable matters and land and
probate disputes among others.
 The Crown Court hears appeals from magistrates' courts.
 The High Court is divided into three specialist divisions; Queen's Bench, Family
and Chancery
 The Court of Appeal hears appeals from the County Court, the High Court, the
Restrictive Practices Court, and from the Employment Appeal Tribunal.
 The House of Lords (Supreme Court for the United Kingdom) hears appeals from
the Court of Appeal and the High Court.
FAST FORWARD
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In appropriate cases it is possible to refer a case to either the European Court of Human Rights
or the European Court of Justice, although they are not strictly within the English court
structure.

The criminal court structure

The criminal court structure comprises the following.

 Magistrates' courts hear summary offences and committal proceedings for indictable
offences.
 The Crown Court tries serious criminal (indictable) offences and hears appeals from
magistrates' courts.
 The Divisional Court of QBD hears appeals by way of case stated from magistrates'
courts and the Crown Court.

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  The Court of Appeal hears appeals from the Crown Court.
 The House of Lords (Supreme Court for the United Kingdom) hears appeals from the
Court of Appeal or a Divisional Court of QBD.
A limited number of Commonwealth countries allow appeal to the Privy Council in London,
which is mostly staffed by House of Lords (Supreme Court) judges.

Magistrates' courts

Magistrates' courts are the lowest ranked criminal courts.

 They try summarily (without a jury) all minor offences.

 They conduct committal proceedings, which are preliminary investigations of the
prosecution case, when the offence is triable only on indictment (by a Crown Court).
 Indictable offences are more serious offences that can only be heard in a Crown Court.

Summary offences are minor crimes, only triable summarily in magistrates' courts.
Some offences are 'triable either way', meaning the accused has the choice of court that is
used.

Magistrates also have some civil jurisdiction which includes the following:

 Family proceedings (financial provision for parties to a marriage and children, the
custody or supervision of children and guardianship, and adoption orders).

 Enforcement of local authority charges and rates

Appeals

A defendant convicted on a criminal charge in a magistrates' court has a general right to a

rehearing by a Crown Court. A 'case stated' appeal is based on the idea that magistrates or the
Crown Court have wrongly interpreted the law. If not, then the case may be sent back to the
lower court with instructions as to how it should be decided.

On family matters, appeals are to the Crown Court with a further (or alternative) appeal on a
point of law to a divisional court of the Family Division of the High Court.

Personnel
The key personnel in the magistrates court are the magistrates who hear the cases.

These fall into two categories:

 Magistrates, who are lay persons selected by the Lord Chancellor (Justices of the Peace)
 District Judges (professional paid magistrates)

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The magistrates' courts are also staffed by clerks, who can provide legal advice for lay
magistrates.

The County Court

County courts have civil jurisdiction only but deal with almost every kind of civil case. The
practical importance of the county courts is that they deal with the majority of the UK's civil
litigation.

The county court is involved in the following matters.

 Contract and tort (except defamation of character) claims.
 Equitable matters concerning trusts, mortgages and partnership dissolution.
 Disputes concerning land.
 Undefended matrimonial cases.
 Probate matters.
 Miscellaneous matters conferred by various statutes, for example the Consumer Credit
Act 1974.
 Some bankruptcy, company winding-up and admiralty cases.

The county court deals with the following:

 All small claims track cases, and
 All fast track cases.

Multi-track cases are allocated either to the county court or to the High Court if they are
complex.

Appeals

From the county court there is a right of appeal direct to the Civil Division of the Court of
Appeal for multi-track cases. In most other cases an appeal goes to the relevant Division of the
High Court.

Personnel

The personnel in the county court consists of:

 Circuit judges, assisted by
 District judges

Civil Procedure Rules

Civil procedures encourage parties to consider alternative methods of dispute resolution and
to avoid expensive litigation, resolving cases quickly and without unnecessary confrontation.
Early settlement of disputes is encouraged during proceedings.

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The court has the power to control every aspect of the litigation process, shifting responsibility
away from the litigants and their advisers. The court is intended to be a place of last, rather
than first, resort.

There are two principal areas in which the civil procedure rules are relevant:
(a) Tracking
(b) Case management

Tracking

After a defence has been filed, the case will be allocated to one of three tracks.

(a) In the small claims track, claims of no more than £5,000 will be heard. These are cases
that are to be dealt with quickly and informally, often without the need for legal
representation or for a full hearing.

(b) The fast track is for claims of between £5,000 and £15,000 where the trial is to last no
longer than one day. These are subject to a simplified court procedure and a fixed
timetable designed to enable the claim to be determined within 30 weeks.

(c) Under the multi-track, claims of over £15,000 which are to be managed by the courts will be
heard.

Case management

After allocation, the court will give directions setting out the procedures to be followed in
bringing multitrack cases to trial. These will be an initial 'case management conference' to
encourage parties to settle the dispute or to consider alternative dispute resolutions (such as
mediation or arbitration). Features of the procedures include the following.

(a) A pre-action protocol, which entails setting out the claim to the defendant in an
attempt to negotiate a settlement. The emphasis is placed on co-operation to identify
the main issues. Failure to co-operate may lead to cost penalties, regardless of the
eventual outcome of the case.

(b) A strict timetable for exchange of evidence is set by the court, including witness
statements and relevant documents.

(c) A three week trial window is allocated once the defence has been received. This does
not change and the trial can fall anytime within this period.

(d) There are cost penalties for failing to meet any deadline or date set by the court.

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There is a senior judge with overall responsibility for civil justice, known as the Head of Civil
Justice. His appointment is designed to raise the status of civil justice, which had long been in
the shadow of the criminal justice system.

Crown Court

The Crown Court is a single court, but it sits in 90 different towns and cities and also at the
Central Criminal Court (the Old Bailey) in London.

It deals with the following matters:

 Indictable offences with a jury.
 Appeals from magistrates' courts.
 Committals for sentencing from magistrates' courts.

The Crown Court deals with a few types of civil case, for example appeals from the magistrates'
court on matters of affiliation, betting, gaming and licensing.

Appeals

From the Crown Court there is a right of appeal on criminal matters to the Criminal Division of
the Court of Appeal. An appeal by way of 'case stated' on a point of law may also be made to a
Divisional Court of the Queen's Bench Division, in the High Court.

Personnel

The Crown Court has the following personnel:

 High Court judges (for serious offences)
 Circuit judges
 Recorders

The High Court

The High Court is organised into three divisions:

 Queen's Bench Division
 Chancery Division
 Family Division

1 Queen's Bench Division

The Queen's Bench Division (QBD) deals mainly with common law matters, such as:
 Actions based on contract or tort.
 Some appeals from the county court

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  Appeals by way of case stated from magistrates' courts.
 Some appeals from the Crown Court.

It also has a supervisory role over inferior courts. It is the largest of the three divisions, having
73 judges of which the Principal Judge is the Lord Chief Justice. It includes a separate Admiralty
Court to deal with shipping matters, and a Commercial Court which specialises in commercial
cases. The QBD sits in London and a small number of large cities in England and Wales.
It may issue a writ of habeas corpus, which is an order for the release of a person wrongfully
detained, and also prerogative orders against inferior courts, tribunals and other bodies such as
local authorities.

There are three types of prerogative order.

 A mandatory order requiring the court or other body to carry out a public duty.
 A prohibitory order preventing a court or tribunal from exceeding its jurisdiction.
 A quashing order ordering a court or tribunal which has taken action to submit the
record of its proceedings to the High Court for review.
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2 Chancery Division

This division headed by the Lord Chancellor, deals with traditional equity matters.
 Trusts and mortgages
 Revenue matters
 Bankruptcy (though outside London this is a county court subject)
 Disputed wills and administration of estates of deceased persons
 Partnership and company matters

There is a separate Companies Court within the division which deals with liquidations and other
company proceedings, and a Patents Court established under the Patents Act 1977.

3 Family Division

This division deals with:

 Matrimonial cases
 Family property cases
 Proceedings relating to children (wardship, guardianship, adoption, egitimacy)
 Appeals from magistrates' courts on family matters.
 Appeals from county courts on family matters

Appeals

Civil appeals from the High Court may be made to the Court of Appeal (Civil Division) or to the
House of Lords (Supreme Court for the United Kingdom), under what is known as the
'leapfrog' procedure. This procedure is rarely used.

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Criminal appeals are made direct to the House of Lords (Supreme Court for the United
Kingdom) where the case has reached the High Court on appeal from a magistrates' court or
from the Crown Court.

Personnel

The High Court is staffed by High Court (puisne) judges. The chief judges in each division are as
follows:
 Queen's Bench Division: Lord Chief Justice
 Family Division: President
 Chancery Division: Lord Chancellor (nominally), in practice the Vice Chancellor

The Court of Appeal

A court of first instance is the court where the case is originally heard in full. The appeal court
is the court to which an appeal is made against the ruling or the sentence.
If the appeal court finds in favour of the appellant the original decision is reversed ie the result
is changed, but the law is not. This is different from overruling which happens when a higher
court finds a lower court's decision to be wrong in law and in future the law is changed.

Civil Division

The Civil Division of the Court of Appeal can hear appeals from the High Court, county courts,
and from certain other courts and special tribunals. It may uphold or reverse the earlier
decision or order a new trial.

Criminal Division
The Criminal Division of the Court of Appeal hears appeals from the Crown Court. It may also be
invited to review a criminal case by the government or to consider a point of law at the request
of the Attorney General.
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Appeals
Appeals lie to the House of Lords (Supreme Court for the United Kingdom).

Personnel
The Court of Appeal is staffed by the Lord Justices of Appeal. The chief judges in each division
are as follows:
 Civil division: Master of the Rolls
 Criminal division: Lord Chief Justice

The House of Lords

The House of Lords is staffed by Lords of Appeal in Ordinary (also called Law Lords). It has a
judicial role, as the highest appeal court of the legal system. Judges in the House of Lords are

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also made life peers so they may choose to attend sittings of the House of Lords when it is
exercising its legislative function (ie as part of Parliament) but they rarely do so.

The Supreme Court for the United Kingdom

The Constitutional Reform Act 2005 which received Royal Assent on 24 March 2005 has
severed the link between the legislative and judicial functions of the House of Lords.

A Supreme Court for the United Kingdom will be established and is expected to open for
business in October 2009. It will consist of 12 judges known as 'Justices of the Supreme Court'
and its members will include a President and a Deputy President. The initial members will be
the Lords of Appeal in Ordinary who are in tenure at the time.
Its role will be the same as the existing House of Lords' appellate function, however it will
extend into other matters outside the scope of your syllabus.

The House of Lords will continue with its current legislative role once the Supreme Court has
been established.

The European Court of Human Rights

The European Court of Human Rights is the supreme court of those European states who have
signed up to the European Convention of Human Rights. Any individual who alleges that their
human rights have been violated can bring an action against those responsible.

Since the Human Rights Act 1998, the UK has incorporated the European Convention of Human
Rights into UK law, enabling enforcement to be exercised by UK courts.

The European Court of Justice

The European Court of Justice has the role of interpreting European Treaty law and ensuring it
is observed. European laws are enacted in the UK and are therefore directly applicable to
individuals and businesses within the UK. Cases are usually between nation states or European
institutions, however, individuals can appeal to the ECJ if they are affected personally.

The Privy Council

The Judicial Committee of the Privy Council is the final Court of Appeal for certain
Commonwealth countries. Their decisions are also important to cases heard in the UK as they
have persuasive influence over hearings concerning points of law applicable under the UK's
jurisdiction.

Tribunal
The court system is not the only way to settle disputes. There is also the alternative system of
tribunals.

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Tribunals deal with large numbers of cases which are usually too small to be considered as
needing court action. They give individuals the chance to exercise their rights, in particular
against government decisions and between employee and employer.

The tribunal system

The Tribunals, Courts and Enforcement Act 2007 introduced changes which created a unified
tribunals structure. A two-tier system now exists. The First-tier hears tribunals and makes
decisions. The Upper Tribunal reviews cases and hears appeals. Both tiers are split into
chambers which deal with particular types of case – for example, land and taxation – and are
staffed by experts in that field. Decisions of the Upper-tier Tribunal are made by judges or
experts supervised by a judge. Their decisions are binding on tribunals and public authorities.
Appeals from the Upper Tribunal are to the Courts. Tribunals also have powers of enforcement
of unpaid awards, which do not need to be registered in the county court to be enforceable.

Employment tribunals

Employment tribunals are governed by a number of regulations and the Employment Act 2008.

Composition
Each tribunal is staffed by a legally qualified chairman and two other persons selected from a
panel. One person represents the interests of employers and one represents the interests of
employees. However, in some circumstances, and with the consent of the parties, a tribunal
may be convened with a chairman and one other person.

Jurisdiction
Tribunals have a wide jurisdiction over most disputes between UK employees and employers
such as:
 Disputes about redundancy pay
 Complaints of unfair dismissal
 Questions as to terms of contracts of employment
 Equal pay claims or disputes over issues such as maternity pay
 Appeals against health and safety notices
 Complaints about sex, race and disability discrimination
 Disputes over trade union membership
FAST FORWARD

Procedure

The following procedure is to be followed when taking a dispute to a tribunal:

Stage 1 The claim is made in writing, setting out the claimant's case. It is presented to the
Employment Tribunal Office on a prescribed claim form (ET1).

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Stage 2 On receipt of the claim, the tribunal secretary will consider whether or not to accept it.
Claims will be rejected at this stage if they are incomplete or if the matter is outside the
jurisdiction of a tribunal.

Stage 3 Copies of accepted claims are sent to all relevant parties and the respondent has 28
days to file a reply to the claim made against them (on form ET3). Not presenting a reply can
lead to a default judgement being made.

Stage 4 The tribunal secretary considers the reply and accepts it providing it is complete,
received in time and meets other acceptance criteria. Copies of the reply are sent to all parties.
At this stage the respondent may make a counterclaim against the claimant.

Stage 5 The claim, reply and any counterclaims are reviewed by a chairman and where
appropriate an order may be made without a hearing.

Stage 6 Where a case goes to a hearing, the chairman has full powers to manage the case
including pre-hearing reviews and interim hearings (case management discussions) where
appropriate.

Stage 7 The parties are encouraged to seek conciliation to resolve the dispute and at any stage
either party may withdraw.

Stage 8 A date, time and place is set for the final hearing which proceeds with parties giving
evidence and calling witnesses. The tribunal considers the evidence and makes an order or a
final judgement.

Stage 9 Parties may apply to have certain judgements and decisions reviewed.

Appeal
There is a right of appeal to the Employment Appeal Tribunal (EAT). This is a court of equal
status with the High Court. It hears appeals from tribunals mainly on employment matters. A
High Court judge and two lay assessors from a panel appointed on the Lord Chancellor's
recommendation sit. From the EAT there is a right of appeal to the Court of Appeal. It will only
hear appeals on points of law, it will not reexamine facts.

Advantages and disadvantages of tribunals

Advantages include: speed of proceedings, cheaper costs, informality in comparison to courts,

flexibility (not bound by rules of precedent) accessibility to individuals and lack of publicity.

Disadvantages include: lack of legal aid for most parties and presentation of arguments by
people who are not qualified lawyers.

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