Lloyd's Maritime and Commercial Law Quarterly
REMEDYING THE UNLAWFUL EXERCISE OR NON-EXERCISE OF A NON-FIDUCIARY POWER
Ryan James Turner*
This article is concerned with the power of the court to take upon itself and exercise or re-exercise a non-fiduciary power granted to a contracting party where the grantee of the power has either failed to exercise the power or exercised the power irrationally. In the few instances in which the court has done so, it defers to the grantee of the power by asking how the grantee of the power would, acting lawfully, have exercised the power rather than asking how it would exercise the power as if it were the grantee. However, the principled basis identified by the court to allow it to take this step may be questioned. In this article, it is suggested that the court’s power to exercise or re-exercise a power in the place of the grantee should be no broader than the court’s power to repair a breakdown in contractual machinery, as set out by the House of Lords in Sudbrook Trading Estate Ltd v Eggleton.
I. INTRODUCTION
The law of non-fiduciary powers in the private sphere has, since the decision of Andrew Leggatt LJ in Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The Product Star (No 2)),1 developed apace as part of a broader rethinking of the law of contract.2 The practical effect has been to reframe the way in which claims involving the exercise or non-exercise of non-fiduciary powers are pleaded and the remedies that are sought.3 Despite the proliferation of cases involving non-fiduciary powers, the remedial consequences of the exercise of a non-fiduciary power in breach of the controls on the power have not been worked out. Courts have not yet grappled with the distinction between an exercise of power that is valid, but for which the donee is liable to a monetary remedy as a result of a breach of duty in exercising the power, and an exercise of power that is invalid, void or not contractually effective for having been exercised in excess
* Barrister, Maitland Chambers. I am grateful to Frances Leitch, Edward Blakeney and Andrew Brown for their helpful comments on drafts of this article. For a broader, sustained analysis of non-fiduciary powers, see Ryan James Turner, Rights, Powers and Remedies in Commercial Law (Sweet & Maxwell, London, forthcoming).
2. See the account of the general sea-change in contract law described in David Ibbetson, A Historical Introduction to the Law of Obligations (OUP, Oxford, 1999), ch.13.
3. By way of example, compare the way in which the discretionary power to grant a bonus to an employee is addressed in Powell v Braun [1954] 1 WLR 401 as a claim in restitution (a quantum meruit despite the finding of a contractual promise), in contrast to more recent authorities, such as Horkulak v Cantor Fitzgerald
International [2004] EWCA Civ 1287; [2005] ICR 402, in which a similar claim is pleaded as a claim in damages for breach of the duty of rationality associated with the power.
Remedying the Unlawful Exercise or Non-Exercise
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