Andrews, Neil --- "Wormes in the entrayles: the corporate citizen in law?" [1998] MurdochUeJlLaw 16; (1998) 5(2) Murdoch University Electronic Journal of Law

Frames Version

Wormes in the entrayles: the corporate citizen in law?

Author:	Neil Andrews Lecturer in Law, University of Canberra
Issue:	Volume 5, Number 2 (June 1998)

Contents

• Introduction
• Paradise Lost?
• Certainty? Company law?
• Paradise regained?
• Theorised prejudice: indeterminacy in theories of company law
• Porcine Positivism
• Speluncean darkness? Natural law
• Theories waiting for a fact, or a fire? Law and economics
• Reified abstractions, omnibus concepts and metaphors masquerading as facts? Realism
• A long strange trip? Critical legal studies
• The Frankfurt school
• American critical legal studies
• European critical legal studies
• Conceptual inflation and disorder? Teubner and autopoiesis
• Muggletonian Marxism: EP Thompson and the loss of the commons
• The profitability of considering indeterminacy in corporate legal theory
• Appendix
• The billiard player's guide to indeterminacy in company law
• An indeterminate taxonomy of legal indeterminacy
• The failure of language
• The failure of reasoning
• The absence of the syllogism
• Dialectical reasoning
• Paradox
• Antinomy
• The death of law
• Unpredictable events and inexplicable chains of causation
• An absolutely unpredictable event
• Interference produced by two or more causal chains
• Complexity, non-linear or chaos theory
• Modelling indeterminacy in company law
• Notes

Introduction

This, then, is the essence of commercial law - the accommodation of principles, rules, practices and documents fashioned by the world of business: the facilitation, rather than the obstruction, of commercial development. It is part of the genius of the common law that despite the ritual and formalism of its earlier life it has proved able to respond to the challenges of industrial growth. Goode RM, Commercial Law (Harmondsworth: Penguin Books, 1982) 984.

1. Good citizens obey the law. The best have integrity and are truthful and honest. They do not ask how far they can go. If the law is uncertain and there are rewards for the controllers of corporate capital viewing the law as Holme's 'bad man' what are the consequences for these 'great and enduring values' particularly if the corporate form 'makes' its own law? In spite of claims to certainty company law has many symptoms of indeterminacy. This is widely ignored. Yet indeterminacy has significant consequences for the role of law in regulating capital in companies. Responsiveness to changes in commercial practices may be desirable. The reproduction and transfer of capital in previously disapproved of ways, empowerment of the legal profession and lack of control by the state may be questionable. Indeterminacy has been considered in legal theory but has a bad name and is an often avoided issue. In this context writers in neo-classical economics and law, such as Posner, are considered as well as the American realists, such as Karl Llewellyn, who preceded them. Their views are contrasted with those of the Frankfurt school, such as Neumann, and contemporary theorists, such as Teubner. In spite of the varying positions these legal theorists start from there are common features in their description of company law including a focus on explaining change in legal doctrine which, implicitly or explicitly, suggests that company law is indeterminate. There is also wide agreement that changes in the reproduction and exchange of corporate capital drive changes in legal doctrine and, consequently, regulation by law rather than the reverse. They disagree with what the forces driving change are, how law responds to them, what are the consequences for the use of law to regulate companies and whether the changes are good or bad. An Appendix suggests a typology of indeterminacy is proposed based partly on language, ways of reasoning and partly on scientific analogies to construct the shape of indeterminacy in company law.


Paradise Lost?

2. Oliver Wendell Holmes, like Satan in Paradise Lost, remains the most memorable character in the story of Anglo-American law. One hundred years ago, on the 8th of last month, as an Associate Justice of the Supreme Judicial Court of the State of Massachussets, Holmes introduced another serpent into the garden of American law. It was released amongst the lawyers of Massachusetts, law students and their parents at the inauguration of a new hall at Boston University Law School. In his speech, 'The Path of the Law,' he invited his listeners, interested to know where the limits of the law are, to consider the law from the point of view of a 'bad man'. This will clarify for them the difference between law and morality and ethics.


You can see very plainly that a bad man has as much reason as a good one for wishing to avoid an encounter with the public force, and therefore you can see the practical importance of the distinction between morality and law. A man who cares nothing for an ethical rule which is believed and practised by his neighbors is likely nevertheless to care a good deal to avoid being made to pay money, and will want to keep out of jail if he can. ...

If you want to know the law and nothing else, you must look at it as a bad man, who cares only for the material consequences which such knowledge enables him to predict, not as a good one, who finds his reasons for conduct, whether inside the law or out-side of it, in the vaguer sanctions of conscience. ...

What constitutes the law? You will find some text writers telling you that it is something different from what is decided by the courts of Massachusetts or England, that it is a system of reason, that it is a deduction from principles of ethics or admitted axioms or what not which may or may not coincide with the decisions. But if we take the view of our friend the bad man we shall find that he does not care two straws for the axioms or deductions, but that he does want to know what the Massachusetts or English courts are likely to do in fact. I am much of his mind. The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law.[1]
3. Onara O'Neill has recently provided a catalogue of virtues in her argument that there is a link across what is generally seen as the dichotomy between abstract principles of justice and the 'particularities of virtuous lives' making both just institutions and virtuous lives interelated. These virtues can be found in institutions, such as companies. They are the best form of citizen and act differently from Holme's bad man.


the virtues of justice include justice itself, as well as varied forms of fairness, of toleration and respect for others, of fidelity and probity, and of truthfulness and honesty.[2]
4. Holmes went on to speculate that that it might be desirable if 'every word of moral significance could be banished from the law altogether.' This would be 'a law with no duties, rights, or wrongs; no conception of good or bad faith, of reasonable or unreasonable conduct; and no notion of justice or injustice.'[3]


5. Unlike the Critical Legal Scholars of almost a century later Holmes was not advised to leave the academy for inducing cynicism and despondency amongst law students. He was not attacked by a number of judges for introducing students to concepts which would make them unfit for legal practice. Four years later he was appointed as an associate justice of the Supreme Court of the United States where he sat for the next three decades. On his ninety-second birthday President Franklin Roosevelt called at his house. The same President stood in the rain by his graveside when he was buried at Arlington National Cemetery. Hollywood held him up to American youth as an exemplar in the film, the 'Magnificent Yankee'.[4]


6. In 1880 Holmes had introduced his first snake into the Eden of formalist law in the lectures he gave on the common law at the most-Bostonian Lowell Institute. This was most appropriate. The Lowells, like Adam and Eve, talked only to God. From these addresses developed his book The Common Law. It opened with the words:


The life of the law has not been logic: it has been experience. The felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, even the prejudices which judges share with their fellow-men, have had a good deal more to do than the syllogism in determining the rules by which men should be governed. The law embodies the story of a nation's development through many centuries, and it cannot be dealt with as if it contained only the axioms and corollaries of a book of mathematics. In order to know what it is, we must know what it has been, and what it tends to become. We must alternately consult history and existing theories of legislation. But the most difficult labor will be to understand the combination of the two into new products at every stage. The substance of the law at any given time pretty nearly corresponds, so far as it goes, with what is then understood to be convenient; but its form and machinery, and the degree to which it is able to work out desired results, depend very much upon its past.[5]
7. This was a theme to which he returned in 1898: 'certainty generally is an illusion, and repose is not the destiny of man.'[6]


8. This was a criticism of the mechanical approach to law which dominated positivist jurisprudence in the United States, particularly that of Christopher Columbus Langdell.[7] Joseph Beale, who taught conflicts of law at Harvard, represented the most exaggerated form of this reductionist approach to law. He claimed that underpinning both statute and common law were essential and timeless principles which determined the resulting legal system. This meant that the law was 'not a mere collection of arbitrary rules, but a body of scientific principle'. It followed that 'Purity of doctrine may be lost through wrong decisions of courts, thus warping legal principle by bad precedent; but wrong decisions are after all uncommon, and the law is not seriously affected by them.'[8]

Again, instead of being ostracised, in January 1882 Holmes was made Weld Professor of Law, a chair which had been established for him at Harvard Law School. In December 1882 he was appointed to the Massachusetts' Supreme Court.

9. The third serpent Holmes introduced into the formalist garden from the bench. He rejected laissez-faire economic canons as basic principles of common and constitutional law. Legal formalism had accepted, as a scientifically based, classical economic statements. It held:


any law or artificial obstacle that hinders two persons from trading who would otherwise trade, not only interferes with a sacred right, but destroys an inevitable gain that would otherwise accrue to two persons alike.[9]
10. These principles were elevated by Herbert Spencer into an evolutionary principle of social natural selection. The economically fit who successfully used their economic power to negotiate deals to the detriment of the economically weak represented the survival of the fitness.[10] Holmes accepted this conventional wisdom about economic regulation[11] but his dissenting opinion in Lochner v New York[12] reveals the different conclusions he drew for law on the economic revolution wrought by railways, telegraphs, and large manufacturing corporations in American society. He, unlike most other judges, accepted that courts should relax the restrictions which laissez faire economics had induced in the law and permit legislative experiments particularly those restricting the rights of ownership and giving workers protection. He accepted the right of legislatures, representing the popular will, to curb economic forces however misguided that popular will may be.


This case is decided upon an economic theory which a large part of the country does not entertain. If it were a question whether I agreed with that theory, I should desire to study it further and long before making up my mind. But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we as legislators might think as injudicious or if you like as tyrannical as this, and which equally with this interfere with the liberty to contract. Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well-known writers, is interfered with by school laws, by the Post Office, by every state or municipal institution which takes his money for purposes thought desirable, whether he likes it or not. The Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics. ...
Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the State or of laissez faire.[13]
11. By the time Holmes died in 1935 the 'nightmare' school of American jurisprudence was well established in the increasing influence of Realists.[14] They had already dragged American law within the penumbra of the shadow of the valley of indeterminacy. The decade before his death marked the beginning of the 'Age of Anxiety' or 'the jurisprudence of despair'.[15] This, of course, was not apparent at the time. It was a perspective which developed with the reinterpretation of Holme's work as representing ethical relativism in the 1940s.[16] It later became clearer to some that in 1920 Cardozo, who was to join Holmes on the Supreme Court in 1932, had produced 'a legal version of hardcore pornography'[17] in his statements:


I own that there is a good deal of a mystery to me how judges, of all persons in the world, should put their faith in dicta ...

I sought for certainty. I was oppressed and disheartened when I found that the quest for it was futile ... As the years have gone by, and as I have reflected more and more on the nature of the judicial process, I have become reconciled to the uncertainty, because I have grown to see it as inevitable.[18]

12. Holmes remained more enigmatic than the Realists who later used his name. Like Milton, with his Satan, Holmes encourages us to believe that he is not only the super-villain but the not-so-secret superhero of the story.[19] While he described law in terms of prediction he encouraged the study of legal doctrine.[20] Dismissive of an approach to law based on logic or mathematics he still saw law as a science.[21] And, as noted, while he refused to use the beliefs of classical economics as legal principles he did not reject them as a basis on which a properly informed legislature may choose to frame laws. Holmes was a person of his times and class. His ideas of law are the application to law of the realist and pragmatic philosophy of Peirce and James.[22] They were shared in part by Pound[23] and Dewey.[24] Satan, in Milton's story, shared with humanity his knowledge of good and evil. Holmes introduced lawyers again to doubt and uncertainty which he did not appear to share.


13. This paper considers the issues raised by Holmes in the context of company law in regulating actions of corporate controllers. These issues are the indeterminacy of law and that the limits of that indeterminacy found in considering the law as a bad person might, when actions might attract regulatory penalties. To Holme's 'bad man' we could add 'economic person'. Unlike the immoral 'bad man' these amoral controllers of companies are motivated to take actions which maximise their profits and minimise their risks.


Certainty? Company law?

14. Common lawyers have always ascribed certainty as a requirement for commercial and corporate law. Lord Mansfield observed:


Certainty is one great object of all legal determinations, and particularly to be wished for in that branch of the law which concerns corporations, because such questions are often agitated with a heat and spirit not to be satisfied by the best reasons or the soundest discretion, and only to be checked by the authority of rules and precedents, deliberately settled upon former occasions.[25]
15. Yet comparing these statements with the actual law frequently reveals inconsistency. The law seems to be indeterminate. To describe law as indeterminate is to suggest that legal rules or principles will not cause a particular result, that there is always 'an element of variation or uncertainty, choice or discretion' present when they are used to 'determine' issues, that their predictive power is not certain[26] or that they will not lead to one answer.[27] The Appendix sets out an indeterminate taxonomy of indeterminacy in company law. Specific examples in company law are not hard to come by. That part of company law dealing with directors, fiduciary duties, has often been described in absolute terms but they are an elusive concept.[28] Sir Anthony Mason observes of the family to which these duties belong that '[t]he fiduciary relationship is a concept in search of a principle'.[29] Perhaps Lord Mansfield was lying in the public interest and did not want directors of companies, looking at the law as bad people, to know how malleable and fragile the law was an instrument protecting shareholders capital.


16. Indeterminacy is not a new phenomenon in law. This is supported by those who claim that it is banal to say that the legal system is indeterminate. It may be a common feature in all legal systems. Indigenous Australian legal systems show a 'potential multivocality of meaning'.[30] The maxims of Roman law required its judges to be 'subject to a rule of indeterminacy' and do justice by a process of differentiation.[31] That differentiation apparently involved recognising the form, and ignoring the substance, of a number of dodges and rackets which can be reduced to a few categories, recognisable by contemporary corporate legal advisers.[32] This was overlooked in the medieval reception of Roman law. At first it was thought that legal judgment would now lead to absolute truth. The lawyer would became a mechanical conductor of certainty from the texts to the courtroom.[33] Disillusionment, or enlightenment, quickly set in. 1460 and 1630, in parallel processes in both the civil and common law, the inherent uncertainty of legal interpretation was widely recognised in the fracture and impurity of legal reasoning.[34] There was no ratio or mens to be recovered because the law always spoke, each act of interpretation determined de novo and de jure the source of its authority.[35]


17. Indeterminacy has a patchy feel as the taxonomy in the Appendix shows. It seems lesser or greater in different areas and its qualities also vary. It appears to have varying sources. It may flow from the complexities of the corporate form which is stretched over a many forms of business firms.[36] It may arise from general features of legal rules and the ambiguity of language in communicating information, gaps between the substantive rules, in gaps between procedure and substantive rules[37] and frequent failure to invoke them or in between conflicts between different rules.


18. The American Realists, inspired by Holmes, renewed interest in indeterminacy. The Critical Legal Studies movement took it up again. Both Realism and the CLS have faded amidst claims that pointing out that law is indeterminate is hackneyed scholarship.[38] It may be but this feature of law is more generally repressed or ignored than accepted as an ever present element. Duxbury has expressed exasperation with indeterminacy as an absurd interest. He claims most cases are easy cases and the application of doctrine is a foregone conclusion. He also believes that it is obvious that everyone, except for the most recalcitrant formalist, will agree that there are hard cases where the law's application will develop discretionary features.[39]


19. While indeterminacy seems to be as much avoided in company law as in other areas it appears to be growing rather than abating. It is skated over to dissect the detail of a common law doctrine or statutory provisions.[40] Yet the mysterious complexity of the corporate form is recognised[41] as well as the uncertainty of the application of legal rules. Their compounded effect is rarely mentioned. Concern with indeterminacy is not facile if the financial technology used in corporate structures is outstripping the law's ability to regulate it. It is not facile if legal doctrine has 'deep fault lines' that run through the easy cases as well, if the complexity of the area which law is regulating makes any policy underlying the law incoherent, and, if the subject of regulation is a large part of the community's wealth and considerable economic and political power.


20. Indeterminacy in company law has substantial effects. In particular situations it means that the application of rules and their enforcement by the state involves negotiation or mediation. If legal rules do not bind the state cannot regulate the flow of information about, and the change in control of, the corporate leviathans it purportedly governs in the public interest. If they do not bind they require those involved in companies to use other means to protect their interests. It enhances the power of the legal profession.[42] Indeterminacy has one further significant effect. If rules do not make fast they permit the incremental creep of changes in the social, economic and political interests in companies. A corollary of the uncertainty of the legal rules, in the common law system, is that there is a legal answer to every question asking 'what is the law concerning this matter?'. This interaction ultimately produces a change in the application of legal rules if not in the form in which they are stated.[43] It can mask considerable change behind continuity.


Paradise regained?

21. A number of legal writers reduce law's role in the regulation of companies to almost vanishing point. Economic forces, standing outside the field of law itself, are seen as significantly reducing the role of the state, the law, and the legal profession in corporate regulation. Other writers have sought to depict the state and the legal system as having greater significance in corporate law and regulation. Some explanations of law's part are complementary and some are conflicting.


22. Benson argues, on the basis of western European legal experience, that domestic commercial law lags behind commercial practice as commerce has always had an international aspect. In his model the legal regulation of corporate capital is seen as being particularly prone to changes in commercial practices in other jurisdictions.[44]


23. There are other ways in which company law in domestic regimes is affected by international practices. The debate in the United States about whether the competition between states for company laws which would attract corporations to incorporate within them was a 'race to the bottom' or 'a race to the top' is unresolved. There is also no conclusion over whether or not it produced more efficient use of corporate capital. It provides a model to see how the increasing deregulation of national economies permits companies to consider the attractions of other jurisdictions. A market model of corporate capital and its regulation might indicate that states and their law are relinquishing control over corporate transactions within them. The deregulation of national economies has created a market environment in which states feel constrained to create arrangements which are attractive to those people who have the power to make the decision to invest.[45] With a multinational company it may not matter what regulatory regime any state has as its economic activities are 'delocalised', that is they do not necessarily take place in any space regulated by any domestic law.[46]


24. While this might lead jurisdictions to create different laws other factors encourage a convergence. Lawyers, particularly United States corporate lawyers, are influential in suggesting a need for a particular corporate law regime to business interests. The legal profession is the inventor and manipulator of information about law and its interface with financial technology which manages legal relations in respect of corporate capital. It has accelerated the production of increasingly sophisticated information and sought to develop new markets for it.[47] Dezalay, for example, shows how lawyers promoted the concept of a market for corporate capital in Europe.[48] They then offered their services to government to advise on policies for increasing the competition for, and therefore, the efficiency of, this capital. They then counselled on the drafting of the legislation. In a further twist their status, as experts on the regulation of capital markets, gave them a veto over proposed laws. Without their approval the laws could not be legitimised to the commercial community.[49] Then, for fees, they guided their clients through the maze of rules the 'state' had constructed showing them how to integrate them in their plans to increase the reproduction of capital.[50] Dezalay contends that what these lawyers argued for were not 'growth strategies' which represent actual 'needs'.[51]


25. Other explanations which do not rely on international aspects of international commercial practice also exist. Some emphasise economic forces as being more significantly than others in their consideration of change in company law. A number of legal theories which deal with change in law are considered in the next part. They mix the 'felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, [and] the prejudices which judges share with their fellow-men' in varying ways to describe change in law. It is in this change in law that indeterminacy plays a significant role as it required to permit change to occur. And change is important.


26. Goode observed.[52]
    This passes as a basic policy of practicing lawyers. Justice Kirby, in 1995, quoted Lord Wilberforce with approval in recognising the complete makeover which companies had undergone and the need for the law to change accordingly:


The thought I want to leave you with is that we lawyers need to reorient our thinking in this whole field, in the interest of capitalism surviving as a system combining modernity and obvious justice - through recognition of the completely changed nature of the function of limited companies - recognition, one must admit, of the considerable abuses to which the system, and the superstructure which lawyers have put on it has given rise ... I want the climate of our thinking to change.[53]
27. Yet what are the consequences of such advice when capitalism is represented by companies and their controllers who, think of the law as 'bad person' or, at least, 'economic person'? Should there be an 'accommodation of principles, rules, practices and documents fashioned by the world of business' or a 'facilitation, rather than the obstruction, of commercial development'?


'Wormes in the entrayles'

28. In company law there are many examples of practices being denounced as fraudulent, deceitful, destructive of commercial values and business confidence and then becoming the established practice. This applies to the corporate form itself. The corporation was widely regarded as a danger to the state and an undesirable practice. Hobbes saw companies as a form of intestinal parasite.[54] After the repeal of the Bubble Act there was a considerable debate over whether forming a joint stock company was an offence at common law.[55] Limited liability,[56] managerial control, financial assistance in the acquisition of shares, hostile takeovers and share buybacks are other examples. Institutional investors presently pivot, while we decide whether they are good or bad. Floating charges are a little different. They were denounced by the Loreburn Committee as a device for fraud after they came into frequent use. It felt unable to recommend that they be made illegal as they were so widely used.[57] Company law, from this viewpoint, represents the accumulated imaginings of bad people. It suggests a different ending to that of Milton's 'Paradise Regained.'


Theorised prejudice: indeterminacy in theories of company law [58]

29. Writing on common law company law frequently assumes the essential positivist view of law that has been the dominate philosophical school in European law for the past two hundred years: the law is presented as conflict-free and built upon relatively uniform foundation of values.[59] This is odd because the writer generally raises a policy or interpretative difficulty in the law but ignores this unifying theme with the other articles in the journal in which it is published. Both in negotiating commercial arrangements and in litigation practitioners are confronted by uncertain legal principles.[60] Legal doctrine is still underwritten by the basic principle that there is only one right answer. So it is impossible to express indeterminacy to this extent in doctrinal argument. It would undermine the dominant legal ideology which is so pervasive that it represents point-of-viewlessness.[61]


30. Indeterminacy in law has had a bad name. It challenges the foundations of liberal ideology in the idea of the rule of law rather than the rule of people. This ideology is more consistent with the legal formalism of the nineteenth and early twentieth centuries. Judicial decision making was


a scientific, deductive process by which preexisting legal materials subsume particular legal cases under their domain, thus allowing judges to infer the antecedently existing right answer to the case at bar.[62]
31. The most recent school to revive it, the Critical Legal Scholars, produced outrage and charges of nihilism and were encouraged to leave law schools to contain the plague they were incubating.[63] This is a widely shared reaction. Goodrich suggests that why such an old issue in western law was so controversial is that 'terminus', the root for indeterminacy, has the sense of boundary and these writers had crossed it.[64] Similar observations in law and economics were subject to less criticism and by different writers.[65]


32. Others have welcomed indeterminacy as a beginning to the establishment of a new legal rationality. Teubner observes that Wiethölder has written about a new 'proceduralization' of law, de Sousa Santos sees the chance for legal pluralism and that Preuss has seen the law developing as the 'institution of societal self mediation.'[66] Laduer has sought to establish an 'ecology' of law to describe the change from a society constituted by individuals for one dominated by organizations.[67]


33. Looking at the role which various theoretical schools have given to indeterminacy in company law it is apparent that new ways of thinking are co-existing with old ways of thinking. There are 'complex patterns of ideas', 'slow and hesitant' tendencies, and 'a coevolutions and coexistence of competing systems.'[68]


34. What is striking about most of the theories is that they focus on the consequences of the uncertainty for judges required to determine disputes. They rarely consider what the consequences are for individuals affected by the uncertainty or the lawyers advising them.[69] In those circumstances it would appear that the legal rules are negotiated between the parties in a contractual form of private law making and that the weaker of the parties in any bargaining is forced to accept a statement of the legal rules less favourable to them.


35. The discussion which follows deals only in a limited way with the two most significant recent writers in common law legal theory, Hart and Dworkin. Hart represents a refined and developed form of positivism. Dworkin has generated a renewed form of the common laws' declaratory theory which has a strong resemblance to Hayek's model of the common law. Neither Hart nor Dworkin have written specifically about company law and little about commercial law. There theories are at a high level of generality difficult to apply to the particulars of company law. Both in the course of their development appear to have been more willing to concede that there is uncertainty in the law.


Porcine Positivism [70]

36. Implicitly or explicitly nineteenth century legal positivists, in emphasising judge made law, recognised the indeterminacy of the law. Bentham was anxious to reveal that judges made law. Austin promoted judges to the role of delegates of the sovereign. In federated states with Constitutions there was no 'sovereign' in the Austinian sense but judges who were arbiters of the Constitution could be seen to take the place of such sovereigns.[71]


37. The law, in HLA Hart's description, had 'a wide core of certainty' and a small 'surrounding penumbra of doubt.'[72] Judges used the law to decide whether a case fell within the core or the penumbra.[73] If it fell within the penumbra they had a narrow discretion to use a power similar to the legislature to make law but this discretion is outside his model of the law[74] and its basic concept of the rule.[75] Hart sketched an inadequate account of rule scepticism in order to demolish it as corroding objectivity in legal interpretation the status of legal rules.[76] Fuller, however, showed how uncertain the boundary between the core and the penumbra was.[77] Hart drew on Wittgenstein's observation in respect of the 'family resemblances' of legal rules to demonstrate the choice the judge has. It has been argued that Hart failed to recognise the 'overlapping consensus' to be found in the interpretative community of law over when it is appropriate to interpret rules having regard to both the plain meaning and the purpose of the rule but that the judge will still be left with a choice.[78] The later Hart showed appreciation of this phenomenon as it was taken up in legal theory.[79] He also came to give context greater significance in determining meaning and the application of rules.[80] The indeterminacy of positivism as a theory has increased with George's proclamation that 'the legal positivist is mainly concerned to produce a rich and accurate description of law and legal systems as they function in human societies.'[81]


Speluncean darkness? Natural law [82]

38. By the 1930s natural law theory enjoyed a revival. Fuller criticised positivism for ignoring law 'in its ethical context.'[83] It was partly the speed of economic change which drove Fuller to abandon positivism for morality and ethics as a sufficiently cohesive social glue.[84] Morality and law are interdependent and a court 'is not an inert mirror reflecting current mores but an active participant in the enterprise of articulating the implications of shared purposes.' In this task judges should not ignore that statutes are also enacted reflecting principles which they should respect in interpretations which respected their purpose.[85]


39. Dworkin's theory of law, unlike Fuller's, concentrates on the law making role of the common law judge.[86] He focuses on rights, asserting that a central part of the law's function is to protect individuals from excesses of state power. As in the common law's declaratory theory, and other theories, these rights are based on principles which pre-exist the law.[87] Legislative law is based on policy rather than principle and court's, exercising self-restraint, should avoid using policies.[88] Dworkin's use of principles owes much to models of the law generated as a reaction to Realism.[89] He portrays the popular positivist version of law as a book of rules which underlie the rule of law.[90] He insists that the common law is more accurately moral rights and duties which are vested in citizens and which the state and other citizens must respect. He describes this conception as based on principles rather than rules and 'more ambitious than the rule book conception' as it captures, and enforces, moral rights.[91] He accepts that these principles may be in conflict. This conflict is resolved by the weighing of the competing principles with one then being given priority. By taking moral rights into the law he would appear to be accepting a high degree of indeterminacy but he resists this.[92] He justifies what the judge does in holding people liable for violating the rights of others as it falls within the law already.[93] His statement that even hard cases have only one right answer has been the subject of considerable controversy. It echoes Rawl's contentions about the rational use of ethics.[94] Hart said most lawyers would ignore it and 'settle for a good night's sleep.'[95] Dissent in appellate courts evidences the difficulty of maintaining his position[96] but Dworkin defends it with very eloquent reasoning.[97] He has come to describe it using the metaphor of the chain novel in which the judge must get the best fit the previous chapters. The moral and other issues Hart had covered by discretion are concealed behind this reasoning which masks what others have considered to be indeterminacy. But as Bell reminds us Dworkin's description of legal reasoning points to the essential continuity in judicial methods in both hard and easy cases. The judge has a responsibility to make the system coherent.[98] But in the end is the law a chain novel in which judges are writing successive chapters? DeMott considered this metaphor in the context of the Delaware chancery court's decisions in management buy-outs and preferred the parable: a factual narrative used to illustrate principles to caution and instruct the reader.[99] Parables are also often very short stories.


Theories waiting for a fact, or a fire? Law and economics [100]

40. Two origins have been suggested for contemporary law and economics. One is Realism.[101] Holmes said in his 1898 address at Boston Law School: 'For the rational study of law the black-letter man may be the man of the present, but the man of the future is the man of statistics and the master of economics.'[102] In the 1920s and 1930s institutionalist economics was most closely associated with the Realist movement in law. Clark used social control as an economic phenomenon to explain the regulation of business.[103] In this model economics fed off legal institutions regulating activities. Llewellyn observed:


it may be queried whether any sane public regulation of economic activity in the public interest - whatever that may be - is not largely accidental. The way of growth seems to be along whatever balance results from the pull and prodding of this and the other private interest.[104]
41. He also wrote: 'legal institutions fix and guarantee the presuppositions on which the economic order rests.'[105] More radical Realists argued that the role of lawyers in legal institutions was to perform, or resist, the frauds required to support the controllers of corporate fortunes.[106]


42. The other origin is the organic view of law promoted by Hayek, although its significance has become more pronounced as law and economics move into the post-Chicago, non-Posnerian mode[107]. Hayek had an elevated view of the common law arguing that it was based on no conscious design but the adjustment of the mutual expectations of individuals which had taken place in an extended evolutionary development.[108] Even if this were true of the common law it need not necessarily apply to statutory interpretation.[109] Hayek was not the first to exaggerate the certainty and restraints which the law imposes on everyone including the judges. Hoyt appreciated the conservatism of the common law under which 'vested rights of property will not be confiscated by the operation of the legal system to any appreciable extent, and the fundamental bases of economic relationships will not be unnecessarily jolted.[110] Hayek does not acknowledge the problem which follows from the abandonment of the logic of the syllogism which was used by Pound and others to criticise the Realist description of the law: it does not provide for equal justice.[111] Hayek also promoted the neo-classical concept of the market which dominated the first generation of law and economics.[112] The lawyers of this first wave were seeking new form of positivist law.[113] From this point of view it could be seen as a reaction to Realism. This is particularly so where the market was seen to be a source of ethical behaviour. So Stigler argued that transactions in the market were voluntary and therefore must benefit one party and not injure the other. As the transactions in the market are repetitive 'deceit and non-fulfilment of promises' are rendered unprofitable.[114] Demetsz argued that the market imposed 'a predetermined moral framework within which to work, for it implies that the good society limits the use of legal sanctions, expands the opportunity for choice by individuals, and, therefore, places the responsibility for behaving ethically on its citizens.'[115]


43. The most influential school of law and economics, associated with the University of Chicago, argued that any indeterminacy in law should be resolved by decisions which would promote free markets and efficient use of resources. They treated rights as 'price signals' which would assign scarce resources to the most efficient users: '[i]n the economic approach to law, legal rights are designed, in part to overcome the conditions under which markets will fail..[116] The most highly developed theory was Posner's concept of wealth maximisation. It has earnt Posner the reputation for being the new Holmes:


their shared tough-minded antisentimentalism, the bleak Mathusian wisdom that there is no free lunch and that well-intentioned efforts to redistribute wealth are usually self-defeating, the ultimate grounding of law - and indeed all social life - in the brute facts of self-preference, territorial defence, revenge instincts, and the struggle for survival.[117]
44. Posner argues that this wealth maximisation made common law more efficient than statute law as it promoted this principle. The judge, and particularly the appellate judge, is unaware of which of the parties is the better person. The rules for judicial compensation and the exclusion of conflicting interest make the judge more impartial. The judge comes to perform the role of the invisible hand in other markets by viewing the parties as representatives of the activities concerned. The requirements for standing make the parties motivated to obtain the best possible rule for themselves as buyers and sellers seek the best price.[118]


45. Economic principles do not provide lawyers with a determinate answer to legal questions.[119] There are varying standards of 'efficiency' within economics itself which economists shift between.[120] Economic values do not collapse into the 'rightness reasons' lawyers use in legal reasoning.[121] Law and economics has generally ignored the principles and practices by which judges decide cases and make law[122] including the political dimensions of any adjudication.[123] Posner's theory that the law has as its primary rule wealth maximisation faces difficulties in engendering certainty into the law. The distinction between this standard and the economist's standard of Pareto efficiency is often blurred.[124] More damaging is the criticism of Coase on whose work Posner relied to develop his concept of wealth maximisation. Coase has described Posner's concept as meaningless.[125]


46. The idea that judge made law in particular is predictable, a problematical issue, underlay Posner's view of company structure.[126] He described the company as a method of solving problems caused by interest rates and the uncertainties of partnership when raising substantial amounts of capital.[127] It is a standard form of contract which resolves these issues at a very low cost by codifying reasonable expectations and avoiding costly drafting.[128] In viewing the company in contractual terms Posner represented the conventional law and economics view of the company as a nexus of contracts of resource holders which considered participation in corporate governance entirely as an analysis of transaction costs[129] although Berle and Means had noticed the use of contractual arguments to justify managerial appropriation of corporate property.[130] There was no consensus about Posner's model.[131] A perspective which it lost was the concept of the corporate interest as the criterion for resolving disputes among the resource holders.[132] Posner's premises for certainty in the law have changed in the course of his writings from the positivism based on the normative force of economic principles to acceptance of Dworkin's analogy of the chain novel.[133] It now is based on Rorty's neo-pragmatism as economic efficiency can be argued in the 'local' areas of law to produce desirable outcomes.[134]


47. Two theoretical articles by Ronald Coase became the basis for claims for normative rules in company law. The first was his 1937 paper on the nature of the firm in which he argued that firms were a way of making complex market transactions more efficient. The minimized, but did not eliminate, 'the costs of exchange transactions on the open market.'[135]


48. The other significant article by Coase was his 'The Problem of Social Cost'.[136] It was used as the basis for Manne's argument, important for corporate regulation, that there is an efficient market in the competition for corporate capital.[137] It is based on an economic analysis which places the market for corporate control in a pivotal position in corporate regulation. In an application of Coases' theorem Manne argued that the market in corporate control aligned directors' and shareholders' interests.[138] That theorem states that where transaction costs do not exist resources flow to their highest valued use. With corporate capital it predicts that another company, which can obtain greater value from the same assets, will buy the less efficient company's shareholders out.[139] If directors do not use the capital in the most efficient way the company will be taken over by those who will use that capital more efficiently.[140] Directors must, therefore, promote shareholder welfare by obtaining the best possible return on the capital invested in order to retain control.[141] Adam Smith, himself, appears reluctant to accept that there could be an efficient market in corporate capital.[142] But by the end of 1980s there was a wide-spread acceptance in American legal writing of Manne's efficient capital market hypothesis. Other writers have followed him with other arguments justifying a market analogy for takeovers. Shareholders are the residual rights holders or risk bearers and this motivates them to prevent the directors shirking,[143] that investment is only likely to be forthcoming on terms that the firm will maximise profits for the benefit of the shareholders.[144]


49. There was dissent from these propositions in arguments that the sharemarket is a mirror of the corporate economy rather than the corporate economy being a mirror of the sharemarket. In this model 'cause and effect run from the economy to the stock market, never the reverse'. There are others who maintain that the market does not even mirror the economy.[145] Some writers concede that market failure is more widespread than is generally recognised.[146] There has been disagreement over how far free market principles should go. Easterbrook and Fischel have argued that there should be no regulation of takeovers and the incumbent directors should remain passive.[147] If there is any inefficient use of capital the benefit of it should go to the bidder rather than the shareholders of the target as this will promote takeovers.[148] This has led to a 'family quibble' as a number of writers have accepted these views while others have rejected the idea that management must remain passive.[149] Others have adopted an inconsistent compromise that hostile acquisitions should not be discouraged while auction markets should be encouraged.[150] There was scepticism about claims for efficiency and synergy following takeovers.[151]


50. This conflict about the market in takeovers and its regulatory effect has not been resolved.[152] Johnson, observing the critical effects of this discussion for legal regulation 1988, called for the re-examination of the basic issue of the overall economic utility of takeovers. He hoped that this would achieve widespread agreement which would end the controversy about the conduct of managers of takeover targets.[153] Eight years later the controversy continues.[154]


51. Many have now joined Posner in his jettisoning of a positivism based on neoclassical economic principles for a neo-pragmatism that recognises that the law is indeterminate.[155] There is growing interest again in institutional economics and transactional analysis in which an attempt is made to fill in the black boxes of neoclassical economics.[156] There is greater willingness to admit that law and economics did not bring greater certainty to law and that '[m]ost law and economics questions are still open and likely remain so for a long time.'[157] At the same time the reasoning behind neoclassical law and economics is blamed for the impoverishment of the ethics of contemporary western society as it ignores justice and morality in favour of considering the price.[158]


Reified abstractions, omnibus concepts and metaphors masquerading as facts? Realism [159]

52. Growing out of the realist and pragmatic philosophy of Peirce and James from the beginning the American movement sought to explain law as a sociological phenomenon.[160] Realism in law came to mean something different from what it did in philosophy and was also not just an American phenomenon.[161] In this they were heavily influenced by Pound[162] and Holmes.[163] As we have seen Holmes saw that there was a need for legislation to reflect the wishes of those who controlled the supreme power in society. In constitutional decisions judges should defer to that power. As he stated in Southern Pacific Co v Jensen[164] the common law is not 'a brooding presence in the sky'. Common law judges make law and policy:


Ours is not a closed system of existing precedent. The law is not such a formal system at all. ... Courts must make law. Indeed courts are major policy makers in our system of government. We must be wary of petrifying the common law into a rigid system, utterly behind the times and totally at odds with the progress of science and social change.[165]
53. Again the radicalism of this statement is tempered by his observations that change to law should be quick but not too quick and that any power in the judge is exercised 'interstitially.'[166] Cardozo also accepted, perhaps more hesitantly than Holmes, the need for judges to make law in the absence of legislation or precedent. The judge 'must then fashion law for the litigants before them.'[167]


54. As a school realism was marked by the belief 'that there was more to the study of law than the study of a system of rules; that for most purposes legal doctrine should be seen in the context of the totality of the social processes.'[168] The Realists parted from Pound in distrusting what courts said. Pound criticised their conception 'of legal principles as incapable of interdependence and logical connection' which emphasised the uncertainty of the law and misrepresented the high degree of certainty in the law. One area of settled principles and fixed certainty was commercial law.[169] They sought to describe what courts do and the role of legal rules in the court's decision making[170] and, as part of this, they produced a vast range of literature on 'legal 'helpful devices'' such as the company.[171] Some focused on power relations in the company and issues of how they could be legitimised.[172] Berle and Means are an example. They argued that the separation of power and control in the company resulted in the question of the property rights of the shareholder not being a legal one: 'An answer to this question cannot be found in the law itself. It must be sought in the economic and social background of the law.'[173] Like other writers from an institutional perspective they found that firms were irresponsible and not serving the interests of the economy.[174]


55. We now see Realism through the filter of its reinterpretation which exaggerated it into simplistic statements that neither morality nor legal rules influenced legal policies or decisions producing a highly indeterminate legal system.[175] Hart labelled Realism as 'the nightmare school' of American jurisprudence[176] as it introduced the 'Age of Anxiety' or 'the jurisprudence of despair'.[177] There were a variety of views about indeterminacy.[178] Frank, with Cardozo partly agreeing[179] thought that the psychological processes behind the giving of judgment were important.[180] Frank attributed the myth of legal certainty to a childish fear of indeterminacy. His view of companies was that judges had turned them into metaphysical concepts which had an independent existence apart from the rules which applied to them. That imagined existence was then used to resolve issues in a process of 'transcendental nonsense' without reference to proper policies involving 'political or ethical value judgments'.[181]


56. Llewellyn sought to reclaim the certainty for law which his own analysis had undermined.[182] He argued against claims that the judicial process is not predictable.[183] He identified fourteen 'major steadying factors' in appellate courts including 'legal doctrine' and 'known doctrinal techniques'.[184] He makes a number of mixed observations about doctrine. In appellate litigation, where the case has been properly run and is worth appealing there are likely to be more than one doctrinal answer.[185] He observed that a court will need to be persuaded that both justice and decency require the rule, and the result, argued for. This means the manner in which facts are presented is critical.[186] Doctrine is applied using accepted techniques but the leeways for their use are broad.[187] Even when legal doctrine is exhausted legal materials are still used in finding an answer.[188] Finally he observes that it is easier to predict the result then the reasons for it.[189] The other steadying factors he identified[190] point towards what Fish has now developed into a concept of lawyers as interpretative communities.[191]


57. Indeterminacy had a purpose for Llewellyn. It was necessary if justice was to be generalised as legal rules and if justice was to be done to individuals. This is a constant tension, but not necessarily a conflict, in the law.[192] He also saw that one of the virtues of law was that it was a brake on commercial changes as it was removed from business. In choosing late, however, law was able to make a better guess about the developments it did take up.[193] In this way change was incremental and improving.[194] Llewellyn's views are revealed in a practical way in his drafting of the Uniform Commercial Code. Two competing schools of thought had emerged in the common law world about the status of equity in commerce: that equitable principles have no place in the world of commerce where people were free to act for their 'own self-advancement and self-protection' or that they had a place as a 'system of commodity exchange ... is possible only on the basis of far-reaching personal confidence in the trust and loyalties of others.'[195] Llewellyn considered that this added to certainty in the law while promoting justice to the individual as a result of his study of the legal processes of the Cheyenne.[196] This recognition of the values of the 'commercial community' in shaping the law suggests that corporate law will come to represent the values of that commercial community. This appears to be the conclusion that Llewellyn reached earlier when he observed that corporate law was largely the outcome of undirected private interests in economic life and that little corporate practice was produced by the law itself.[197]


58. The implication for company law from Llewellyn's realism is that there should be general standards in the law which embody, amongst other concepts, ethical principles. The content of them would be established by referring to the standards and practices of the corporate community. But which part of that community is not clear. The concentration on what courts did, as opposed to what they ought do, removes moral content from the law.[198]


59. Realism in corporate law also dissolved the company, like law and economics, into a series of legal relationships between individuals. At the same time there was a concern with corporate governance and an attempt to analyse it in terms of power as a private system of government. This was the approach which Berle and Means had suggested.[199] It has provided a richer understanding of power in the company but has flattened the economic aspects of the company into one dimension which ignores the social effects of such economic enterprises.[200] Many prominent Realists participated in the regulation of companies with the creation of administrative agencies in Rooseveldt's New Deal. Berle's and Means' book was influential in the approach to regulating companies.[201] Of all their theoretical baggage it was only their rejection of laissez faire economics, on which this insight into economic power was based, which survived their journeys to Washington.[202] The result described by Hovenkamp, misleadingly, was that 'by the end of the New Deal little was left of the classical corporation ... The invisible hand of the market had been struck down by the very visible hand of the state.'[203]


60. Realism's later movements came to focus on legal process in terms of formulation of the law and its administration in a way which sought to remove it from politics and re-emphasis judicial objectivity.[204] Realism can be seen in the recent work of Eisenberg who has drawn on similar concepts to Llewellyn in developing a model of the common law.[205] Realism now has a dated feeling. Any certainty it gave by interdisciplinary studies are shown to be false, which Grant Gilmore had long maintained. His sceptical philosophy was a forerunner of the turn to postmodernism.[206] It tends to concentrate on the physical world and sensory perceptions. Postmodernism and deconstruction have reasserted the force and power of metaphysical concepts and intellectual fictions in legal doctrine.[207]


A long strange trip? Critical legal studies [208]

The Frankfurt school

61. Critical studies in law, as in other fields have derived from Marxism and its idea of the critique of society. Both in common law and European legal theory it is particularly associated with the Frankfurt School which developed a critical theory of Marxism itself. This theory rejected the idea of positivism in the social sciences, particularly the idea that they could be value free. It rejected the immutable materialism of Stalinism and emphasised Marx's use of the Hegelian concept of consciousness as a moulder of the world.[209]


62. Neumann, one of the better known members, drew on both Marx and Weber in his analysis of the role of law in what he described as 'the competitive society'.[210] This was entrepreneurial capitalism in which capitalists interacted freely with each other and in which the security, calculability and predictability of the law and the non-intervention of the state in private affairs was of value in its own right. He developed his theory further from his experience of the turmoil of the Weimar republic and the rise of the National Socialists as well as the phenomenon which he described as 'corporate society', the monopolist power of the German corporate cartels.[211] In this new economic arrangement these formerly desirable qualities implicitly favoured the interests of large corporations at the expense of individuals. The rule of law emphasised formal , and not substantive equality. Companies could use their power to bargain with citizens and then resist government intervention in what they would seek to characterise as private transactions.[212] The generalisation of law, which had an equalising effect, in this period


has a disguising function. In a class society and in a competitive economic system, a general law conceals the realities. By the postulate that the state may rule only through general laws, the competitive economic system is invested with the dignity of a moral value.[213]
63. In this phase there is also a tendency to abandon the idea that 'the legal norms are exactly determined ... that they are as rational and formal as possible, so that the judge has as little discretion as possible.' This leads to 'recourse to legal standards of conduct such as good faith, good morals, reasonableness, or public policy.'[214]


64. In his analysis, the common law, with its system of precedent was different from the systematically codified law of Germany. The same processes could be seen in the commercial law in both systems but in respect of the poor and the 'lower bourgeoisie' the common law was, in his view, 'irrational to a large extent.' [215] A view which it is not entirely justified.[216]


American critical legal studies

65. In the common law world critical legal studies in the United States has been the best known. It borrowed from, and built on, Realism, the Frankfurt School and more recent European Marxist theorists including Sartre and Gramsci.[217] By the late 1980s it had turned towards deconstruction and ethics[218] as well as forms of pragmatism which has also, ironically, attracted Holmes and Posner.[219] In Europe the development of the critique has continued with the French writers associated with postmodernism and also in an autopeosis model of law based on the sociology of Luhmann.


66. Kennedy sought to situate legal indeterminacy in a structuralist framework, with resonances of Neumann, that rules support individualism and standards support altruistic views. In all situations the judge can use an individualist or altruistic argument as these are opposed and competing concepts that flow into the deep cultural structure of the law and which will support either outcome. Their elements are defined in the difference between them which means that they are dependent on each other but they also deny each others existence.[220]


67. Indeterminacy, for Unger, also has echoes of Neumann. It results from an attempt to maintain the ideal of the rule and the liberal form of individualism and private property and rights from the nineteenth century in a society where there is now an overlay of the welfare state which has been absorbed by the law as policies and goals which are achieved through the exercise of discretion. Ironically, the liberal form he describes is itself a previous compromise in which the state granted the elite greater power over natural resources and labour in exchange for accepting the state's right to tax and make war. The way forward, he claims, is for the expropriated resources and labour to be reappropriated in ways which will transform people and liberty.[221] He envisaged a communitarian form of life, representing the sympathy of people for each other, underlying the ethics and politics of communities.[222] This could rescue individual freedom 'from the demise of the rule of law' and bring it 'into harmony with the reassertion of communitarian concerns.'[223]


68. One of the contradictions which Unger noted in contract law is relevant to dealings between shareholders and directors. Contract law seeks to restrain the power of a person to exploit another in terms of requirements of good faith, unconscionability, and in the United States at least, economic duress. He observes, in respect of economic duress, that inequality is endless. The purpose of competition is said to be for the competent and well informed to prevail. The problem for the law is to operate the doctrine without destroying the whole edifice through remaking the market.[224] He points to the dualism of contract law in respect of fiduciary duties.[225] He shows by reference to a long term contract and an informal joint venture agreement how capricious the legal classification can be.[226] Unless these are exposed liberal ideology legitimates the oppression and this state of the law.[227] The paradox for CLS is that any improvement may further legitimise this condition. There has been only limited analysis of company law by CLS writers.[228]


69. Some CLS scholars argued that legal rules produced irreconcilable ideological struggles and cannot contain consistent line for judges to interpret.[229] A number of CLS writers seek to place this ideological conflict more firmly in a Marxist framework.[230] CLS divided into two broad positions on the issue of indeterminacy in law: a radical one that legal structure is in the eye of the beholder and that law does not have an objective structure,[231] and, a moderate one that concedes that law does have an objective structure but that structure can be drastically changed over time by lawyers who try to extend the scope of doctrines which are present only at the margins of the law.[232] It has been used to model corporate litigation in Delaware and answer the counter-intuitive statistics that the courts find regularly for shareholders.[233]


European critical legal studies

70. Critical theory is not restricted to North America and Germany and indeterminacy is seen as not just a feature of the common law. British and Scandinavian writers have also critiqued the law in this way. A number of English lawyers have adopted a critical approach to company law.[234]


71. Wilhelmsson, writing in the Scandinavian tradition, has, like Unger, observed that contradictions within legal doctrine and policy can be vertical or horizontal, that is they may exist at different levels of legal regulation or they may exist in legal elements at the same level. Given the number of systems which converge in the area of company law conflict would appear to be inevitable and to occur in the way Wilhelmsson has noted. Also, like Unger's attempt to construct from the suppressed rules a 'deviationist doctrine, he has also sought to recover a more coherent doctrine from existing legal materials.[235]


Conceptual inflation and disorder? Teubner and autopoiesis

72. The most influential legal theorist with an interest in company law is Teubner who has also been influenced by critical theory. He argues that the problem with the American CLS critique is that it is not radical enough.[236] This, as noted in the Appendix in the context of paradox, is because for law to be law the paradox of self-reference is involved.[237] He does not seek to offer an explanation for the resulting indeterminacy but suggests that we should seek to identify how indeterminacy arises in law in other ways. He uses systems theory based on Luhmann's theory of social autopoiesis to describe these other sources of indeterminacy. This has been described as law's answer to the postmodern crisis in knowledge[238] but it also bears a number of resemblances to Kelsen's pure theory of law.[239]


73. Autopoiesis is a form of homoeostasis found in cybernetics.[240] Teubner at first claimed to use it as a metaphor but he appears to now regard it as having a greater explanatory power.[241] Teubner notes that in society conflict occurs between autopoietic social systems including politics, economics, family, religion, science and culture. In law these occur as an internal conflict between these separate legal fields. This is often because legislatures and courts attempt a compromises between competing policies in making law. The conflict is exacerbated by the legal process in that frequently specialised legal experts identify with the corresponding autopoietic social system as much as the law.[242]


74. His model can be best explained in the context of change in the law. The autopoietic system in law
    
    transposes the evolutionary functions to within the system itself, to internalize the mechanisms for variation, selection and retention. This process of internalization shifts the dynamic of evolution from the environment into the legal system itself, and subordinates it to the logic of legal autopoiesis.[243]
75. Consequently change in law is not the sum total of social evolution which impinges on it and social norms cannot be directly transplanted to law. In this way the evolution of legal values can come to diverge from the evolution of values in society as law determines the preconditions of every change within itself.[244]


76. Law, however, continues to regulate social actions through what Teubner describes as 'information' and 'interference'.[245] Law produces knowledge within its systems which produces its 'autonomous reality' without substantial contact with non-legal systems.[246] This has resonances of Hart's secondary rules of recognition.[247] It is, at the same time, connected to these other systems by 'mechanisms of interference', or what Luhmann calls 'structural couplings',[248] which operate between systems. While this sounds paradoxical what Teubner means is that 'law regulates society by regulating itself'[249] or 'the [legal] system can deal only with its internal construct of the environment.'[250] In the area of economics it is not the economic system's construct of itself that law uses but a construct the legal system has made. This is why Teubner rejects as legal concepts a number of concepts developed in economic analysis alone.[251] Luhmann points out that the economic system depends on codes of property and money but that the economic and legal consequences are completely different and depend on the codes of their own separate systems.[252]


77. This leads to Teubner's analysis of the issue which Weber and Neumann grappled with, the proliferation of discretion in the law and the weakening of legal doctrine which Neumann associated with corporatist or monopolist capitalism, as the result of 'second-order autopeoisis'. He shows how the system of law, as it is responsive to its changing environment including the systems of company law, reduces its internal consistency. This is to be seen in the one-off approach to decision making and the fragmentation of the territories of legal doctrine which have destroyed the ideal of doctrinal unity throughout law and the increasing interaction between autonomous systems of science, technology, economics and communication.[253] This has led Luhmann to warn against weighing existing systems with problems they cannot solve.[254]


78. Teubner, in applying his theory to the company in law, notes that: '[a]utopoietic theory suggests that law plays a modest role in the dynamics of the processes of evolution of industrial organisation.' He sees the process of the development of the company as a blind evolution involving 'the uncoordinated interplay of the mechanisms of variation, selection, and stabilization.' In this process the main role of law has been responsive and to stabilise organisational forms and corporate governance which have grown through these other mechanisms.[255] However, using autopoiesis, to analyse the company itself he claims that it emerges as 'an organized and a spontaneous domain' which insists on the fundamental distinction between contract and organisation in which contract is seen in the context of the environment of the organisation. The company emerges as 'independent, autonomous system of action, reproducing itself not through contractual transactions, but through the recursive linkage of decisions.'[256] In this situation the interests of capital, labour, management and the state are not sovereign in the organisation. There are no rights in ownership of resources or the control of those resources they are all within the power of the 'corporate actor.'[257] Teubner's analysis extends further in the corporate group where he sees the re-entry of the market form within the corporate structure in relations between companies in the group which can be constantly adjusted to get the most efficient mix.[258]


79. Autopoiesis enjoys a poor reputation in law which is only partly deserved. Zolo has described it as a 'pathological syndrome' of 'conceptual inflation and disorder' for which he prescribed 'linguistic therapy for the whole autopoietic lexicon'.[259] Like all metaphors it is unverifiable using scientific methodology.[260] Ironically it presents the same problem as law. It is an extended tautology. As autopoiesis is a system it is explicable in terms of itself so that it is true by definition.[261] Autopoiesis, in the end, is an explanation and an extended simile, the generality of which finally reaches particulars which defy it. Luhmann claimed that the simplifications of the general theory may need modification when applied in particular instances such as law.[262] To some extent, in another paradox, it does that with the level of its generality. Like many abstract theories of law it is difficult to apply to particular aspects of doctrine. However, unlike many abstract generalisations it does allow for the detail and the contradictions which arise from the 'static' within systems.


Muggletonian Marxism: EP Thompson and the loss of the commons

80. Teubner's model resonates at a number of levels with Thompson's detailed description of changes to common property in eighteenth century England. Thompson's saw that in this period 'law ? property'. Law did legitimise the actions of the powerful but it was also used by others to generate competing versions of law to legitimise their opposition to the transformation which was happening to common property. The tools which he used in that analysis are significant because they provide lawyers with metaphors to analyse the competition over the ownership and control of the capital of the company.


81. Thompson provides an example of how no single hypothesis can explain the transformation of property rights by capitalism. The details contradict any unifying explanation as the static in Teubner's model predicts that different organisms will respond differently to the same information. It was an erratic process. Some local communities resisted the removal of their rights and acted on the belief that they continued to hold them. Legal decisions sometime went against the trend. Both processes preserved common rights in particular places well into the nineteenth century until they faded as irrational anachronisms as the economic and political system of which they had been part receded even further into the past. The lack of a uniform trend is clearer in the context of Thompson's account if we add to it an account of how lawyers, if not the law, was encouraging the ownership of common property in London through joint stock companies in this same period.[263]


'Habitus'

82. Thompson noted that all parties to disputes about common property and use rights could seek to assert customs in justification of positions which favoured themselves. Thompson notes that agrarian customs were never facts but 'ambiances'. These customs took place in 'a context of sociological norms and tolerances' and could, Thompson argued, be understood with Bordieu's concept of 'habitus':


[A] lived environment comprised of practices, inherited expectations, rules which both determined the limits to usages and disclosed possibilities, norms and sanctions both of law and neighbour pressures.[264]
83. In this habitus 'all parties strove to maximise their own advantages'.[265] The community of company 'stakeholders' is far removed from that the village and there are problems of communication and participation in any analogy. Using the concept of 'a lived environment' both as a metaphor for conflict within the company and conflict in the community debating corporate governance more generally may illuminate why conflicts of opinion often appear so difficult to resolve in the sense of deciding which is the 'correct' or 'right' position. Many parties to corporate disputes or the corporate governance debate may be able to put legitimate but conflicting positions through careful choice of arguments.


'Custom'

84. 'Custom' operates in the community, far removed from the 'habitus' of the English common, which debates corporate governance or a company's affairs. What was called 'custom' in previous centuries is now included in the word 'culture.'[266] The twentieth century is not the first time that there has been a complex interaction between law and popular culture.[267] They did become disconnected in the nineteenth century when collectors of folklore 'separating survivals from their context, lost awareness of custom as ambience and mentalité. Before this time custom was praised as both 'old' and 'good'. He also notes that custom had 'close affinities' with the common law. He recognises that customs were not necessarily old but that in the eighteenth century it 'was the rhetoric of legitimation for almost any usage, practice or demanded right.' It was:


So far from having the steady permanence suggested by the word 'tradition', custom was a field of change and of contest, an arena in which opposing interests made conflicting claims.[268]
85. Thompson claims that it is a 'clumpish' term which invites being taken apart. It was often a careful selection of things which would defend their present interests.[269] It was also 'common sense' or 'praxis' as Gramsci noted in observing the two consciousnesses of 'a person in the mass'. The 'popular morality' of folklore and the 'official morality':


For Gramsci also insisted that this philosophy was not simply the appropriation of an individual but was derived from shared experiences in labour and in social relations, and is 'implicit in his activity and which in reality unites him with all his fellow-workers in the practical transformation of the real world.'[270]
86. These two theoretical realities can be seen as deriving from two aspects of the same reality, the necessary conformity with the status quo and the common sense derived from the shared experience with fellow workers which exposes the first to ironic criticism.[271]


87. The administration of company law is also imbued with custom although the communities involved have significant differences with Thompson investigated.[272] Again this suggests that the reality of relationships in the company is something apart from law but is based on shared experiences. The shared experiences of shareholders may be few, those of the directors many. As well the shadow of daily practice in the particular company transforms these relationships.


88. Thompson's conclusions suggests that the conflict was between rival legal orders or, possibly, conflict between competing interpretations in the one legal order. He concluded that the law 'is an arena of conflict within which alternative social visions contended, bargained and survived.'[273]


89. This produced an indeterminacy in the law. In both the inability of Whig grandees and the rural rich to get the decisions they wanted in the courts and the successful resistance of forest residents and country people to what they believed to be a violation of their rights Thompson found that law was imbricated throughout the society. It was in the relations of the ruling class within itself, with the state and with other classes.[274] He claims that the Whigs and the Hanoverian kings based their claim to power on the law and could not retain their legitimacy if they repudiated it.[275] He saw this as applying to the civil law as well as the criminal.[276] He relied on Weber's view, now disputed, that law can create a legitimate social order.[277] Nevertheless confidence in the legal regulatory regime is still a familiar assertion in company law and securities regulation. Thompson argued that the law could be found in the beliefs, practices and relations of the yeomanry and minor gentry.[278] It could also be found in the society of the poor.[279]


90. Thompson's achievement, in recovering the forgotten legal history of the rural poor, is a telling illustration of the fragmentation and discontinuity of legal knowledge. Once recovered it contradicts any deterministic view of social and legal change.[280] It also reveals the schizoid character of law. The developments in law in the eighteenth century were not all hostile to collectively owned property. The collective rights destroyed were those based on tradition. New forms based on contract, particularly in companies, were nurtured by the law and grew in this period.


91. Thompson argued that what was needed was a 'post-Marxist' analysis.


A historical materialism which would view society as an organic whole, overcome academic procedures of division and isolation, and recapture the unitary spirit of human resistance to exploitation and oppression.[281]
92. This suggests that in struggles between shareholders and company managers that the law will be found in a number of places in those relationships. As Foucault indicates the law may be constituted by the interplay between information and administration.[282] The company can be a locality in which Rorty suggests that people may still take pragmatic actions with meaning.[283]


The profitability of considering indeterminacy in corporate legal theory

93. Legal theories are often devised at a level of abstraction that makes it difficult to apply them in any coherent way to particular situations. Theories relating to indeterminacy in company law are no different. Indeterminacy haunts the legal mind. Hart and Dworkin seek to marginalise or eliminate the nightmare from law. Others, such as the writers in law and economics seek to subvert it to their own purposes and use it to extend the empire of wealth maximisation. What could be more consistent with the duties of directors of companies? Some Realists, like their descendants the Critical Legal Scholars, shocked by using it to break the icons of the law. Others, like Llewellyn and Unger, saw that indeterminacy was a not a completely undesirable quality. It permits the plates of justice as an abstraction and justice to the individual to slip against each other without too many jolts to the body politic. It permits people with a vision of justice to construct a different and more 'just' version of the law. Neumann's observations remind that legal rules represent choice and that the abandonment of a general abstraction for the particular may benefit those more able to exploit the opportunity. Teubner's autopoiesis provides a way to conceive of order in what appears to be chaotic periods of change. It gives to law, and those seeking its protection, the dignity of independence. There is no complete isolation of law from other systems. It will interpret the data for itself but where conflict exists between systems outside of itself it is capable of reproducing that conflict within itself. It may, through its own static, create competing principles within itself. It is, as observed by Neumann, capable of generating rules to accommodate the one-off deal. As an organic model it mirrors the concept of 'habitus' used by Thompson to describe the contest about common property and common use rights he witnessed in eighteenth century England.


94. Indeterminacy in corporate law can be viewed through the complementary organic models of communities, and the interaction of law with other social structures in those communities, which Teubner and Thompson have created. Both recognise that law has a degree of autonomy. It is influenced by changes in the rest of society but it organises them in accordance with its arrangement of information. The conflicts within the other systems may be imported in this interaction. Their models also reveal the influence of law on other social institutions. Thompson found that law was embedded in all types of relationships and phenomenon. Teubner's claim for law appears to be more modest. It follows from his theory that if law interacts with other systems and is affected by them that interaction takes place in the other direction. However, Teubner observes that law's influence over the corporate form may not be great. Teubner's model is more abstract and generalised than Thompson's. Yet his 'static' plays a similar role to the details which Thompson observed. Thompson shows how the conflict with other systems, or habitus, such as the agrarian economy, invoked principles from law as parties contested the assertions to rights made by others. Thompson's account suggests that law may play a larger role in the shaping of the institutions of capital, such as the company, than Teubner allows. This can be seen in the role of the lawyers in the rise of the joint stock company based on trust and partnership and in potential breach of the Bubble Act.[284]


95. Both provide models for dispute and resort to law within the company. Thompson uses habitus and custom and reason in which parties in conflict over the allocation of capital can be seen involved in an arena of conflict. Teubner presents as conflict between autopoietic social systems. Indeterminacy in law can be seen as representing patterns of social relationships under stress in the competition for capital. At the same time law is changed by the conflict generated in itself over what contemporary values it should take up and display. This may explain why the law relating to directors' duties appears to be acutely indeterminate. Thompson shows that the conflict between parties does not end with the same side always winning.


96. Conflict between habitus or autopoietic social system are introduced into the habitus or autopoietic system of law. A number of corporate transactions produce conflicts over property of great value in which considerable pressure is placed on parties and their lawyers to push the meaning of language beyond its limits. In this conflict there are no simple syllogisms to supply the right answer. Parties and lawyers are confronted with definitions with reversible meanings through their self-reference and paired arguments for and against particular transactions. Underlying these is the tension between the black letter law and the spirit of the law to which all parties and their lawyers can also resort. In complex transactions with conflict between individuals, and over the law, unexpected events can lead to the transaction taking place, contingencies coinciding in the course of that transaction and events magnified by other incidents can occur in unexpected ways. Corporate transactions often invert relationships, processes and legal rules which add to the possibility of the conflict producing arguments with results manifesting bounded instability and the unexpected and unintended interaction of legal rules producing effects analogous to strange attractors.


97. The lacuna revealed in the law by these conflicts can be filled by rules which would represent the most efficient use of capital, although what that use is, and how it is to be measured can also be the subject of dispute between interested parties. Legislatures and judges may seek to make rules which use standards of fairness and reasonableness. They assist in resolving tension within law between justice as an abstract principle and justice in the individual case. They, as Llewellyn observes, enable judges and lawyers to find the law immanent in the corporate community. This move from rules to standards has the potential, in the movements within capitalism, to favour the powerful as Neumann recognised. This is significant if the other insight of the Realists is also remembered that the company is only the cluster of legal rules with no other separate existence. Within fiduciary law the rules applying to trustees restricted the right of directors to deal with company property in a self-interested way. The movement to a standard based on reasonableness and accepted standards of corporate management give directors greater freedom to deal with those assets in ways which are advantageous to themselves and disadvantageous to their shareholders.


98. Yet as Thompson, and the Critical Legal Scholars, find if there is resistance within the habitus to the claims made by the more powerful law is capable of generating a different version of doctrine to deny those claims as well as support them. The contradictions between statements of legal rules and the competing policies underlying them present the opportunity for various arguments to be generated to support these varying views. There can be a directors' statement of legal doctrine and a shareholders' statement of legal doctrine. Thompson discovered in eighteenth century England that the powerful were constrained by the law which the courts administered. When the courts did find against the powerful the effect was to further legitimise the law as it was seen to be justifying its own rhetoric of justice and fairness. Branson also concluded from his survey of corporate law in the courts of Delaware two centuries later that the law enables the courts to find for both the shareholders and directors in ways which both legitimises the their role in resolving company disputes and, in another paradox, provide a steady stream of decisions to better guide lawyers in advising directors on what the courts might do.


Appendix

The billiard player's guide to indeterminacy in company law

As capitalism (or 'the market') made over human nature and human need, so political economy and its revolutionary antagonist came to suppose that this economic man was for all time. We stand at the end of a century when this must now be called in doubt. We shall not ever return to pre-capitalist human nature, yet a reminder of its alternative needs, expectations and codes may renew our sense of our nature's range of possibilities. EP Thompson, Customs in Common (Harmondsworth: Penguin, 1993) 15.
99. Milton Friedman argues that we will make excellent predictions about billiards if we assume that an expert billiard player plays 'as if' she knew the:


complicated mathematical formulas that would give the optimum directions of travel, could estimate accurately by eye the angles, etc, describing the location of the balls, could make lightening calculations from the formulas, and could then make the balls travel in the directions indicated by the formulas. Our confidence in this hypothesis is not based on the belief that billiard players, even expert ones, can or do go through the process described; it derives rather from the belief that, unless in some way or other they were capable of reaching essentially the same result, they would not in fact be expert billiard players.[285]
100. He makes this argument to justify the reasonableness of his assumption that firms behave as if they were seeking to maximise their profits.


101. Using Friedman for a purpose he never intended this suggests that we make excellent predictions about indeterminacy in corporate law if we assume that the expert corporate lawyer advising, or judging, 'the man who cares nothing for an ethical rule which is believed and practised by his neighbors' but who nevertheless cares 'a good deal to avoid being made to pay money, and ... to keep out of jail ... ' knows the principles of law and where they weaken into indeterminacy.


An indeterminate taxonomy of legal indeterminacy

102. To know the shape of uncertainty and to trace the outlines of indeterminacy is to begin to understand both its effects and uses. This is significant in corporate law where legal standards often have little impact on corporate governance.[286]


103. A non-exhaustive, and overlapping, taxonomy[287] of metaphors for indeterminacy in law could look like:


1. The failure of language
2. The failure of reasoning
1. The absence of the syllogism
2. Dialectical reasoning
3. Paradox
4. Antinomy
5. The death of law
3. Unpredictable events and inexplicable chains of causation
1. An absolutely unpredictable event
2. Interference produced by two or more causal chains
3. Complexity, linear or chaos theory

The failure of language

104. Some lawyers look for certainty in language.[288] Legal rules are stated in words which, to use Hart's metaphor, create a penumbra between situations in which the rule will operate and situations where it will not.[289] There seems to be wide agreement this leads to a partial indeterminacy in legal rules[290] but conflict over whether or not that indeterminacy is radical.[291] Words require interpretation. It is ironic that there is no agreement over the core meaning of hermeneutics, which signifies interpretation.[292] Hart, the most influential of recent legal positivists, observed that the open texture of legal language meant that one interpretation was not compelled.[293]


105. Using analytical techniques based on concepts of interpretative communities, deconstruction and semiotics a number of writers have concluded that the language of the law is indeterminate although there are varying equivocations about the consequences of their conclusions.[294] It is claimed, and denied, that meaning depends on context.[295] There are disputes over the consequences of the meaning of words changing over time.[296] There are claims that the law is radically indeterminate and that any metaphor which suggests that there is a core meaning where a rule will apply is incorrect.[297] Schauer, in his criticism of radical indeterminacy, impliedly admits that the proponents of a more moderate indeterminacy have a point. He writes that 'lawyers might be seen as pathologists professionally preoccupied with disease rather than health.' He argues that the weight that language is expected to bear is added to by an expectation that courts will play a significant role in resolving a dispute which has become sufficiently acute to be litigated. The parties focus on the weaknesses in the language and thus focus attention on the failings of words rather than their invisible successes.[298] Endicott's recently examined various claims to radical indeterminacy on the basis of language. He concludes that most turn out to be claims to indeterminacy on the basis that other influences apart from language lead to the words being applied in a manner different to that which might be thought.[299]


106. The Privy Council recently acknowledged, unintentionally, the significance of language in company law in observing that the company consists of nothing more than 'the applicable rules.'[300] Language fails at the core of company law in describing the legal person of the company. It can mean the legal fiction which is the body corporate in a parallel concept to the state as a body politic. It can mean the enterprise itself as a pool or resources. It can mean the association between the natural persons involved in it.[301] Both Schauer's and Endicott's defence of determinacy in the law indicates that the language of the law cannot always bear the weight of conflict and that those conflicts may be driven by influences external to the law.


The failure of reasoning


The absence of the syllogism

107. There is an assumption in legal reasoning that for a theory or doctrinal statement to be accepted it should reflect sufficient reasons to produce a certain outcome.[302] However there is only one form of reasoning which achieves this outcome and that is deduction from shared premises, which is not a feature of legal reasoning.[303] Law uses other forms of reasoning which must produce uncertain outcomes.[304] Again this marks the core of corporate law. There is no agreement on the premises in company law as there is no agreement on what the company is.[305] It can be, amongst other things: a 'goal orientated social system', a 'relation of bureaucratic domination', a 'governance structure',[306] an 'enterprise'[307] or a 'nexus of contracts'. This determination of the 'essence' determines how the law constructs the company for its present purposes.[308]


Dialectical reasoning

108. A feature of legal argument is that an argument may be met by a counter-argument which reverses the first argument. A person may argue that a rule should apply. The opponent may argue that a standard should apply. Dialectical logic in the Hegelian sense, and as borrowed by Marx, sees contradictions as fruitful collisions which may yield a higher truth in the synthesis of the two arguments.[309] These conflicting arguments, it is said, merely indicate that the law is dialectic but not that it is indeterminate.[310] Law may be dialectic if the conflict was limited as in the example but conflict over the application of a legal rule is rarely so precise and generally involves a cluster of possible conflicting rules. Often the conflict is between principles generated from different models of the company. Mannolini argues, for example, one reason why the case law on directors' duties is unsatisfactory. He contends that conflict within the company has to be seen as 'a natural and predictable result of disparate economic interests.' The contractual model of the company he uses generates market-based arguments. However the courts frequently apply opposing trust-based concepts. He perceives that this produces what he calls 'procedural dysfunction' in adjudicating 'economically-driven' disputes.[311]


Paradox

109. Paradox is 'just any conclusion that at first sounds absurd but that has an argument to sustain it'[312] Paradox is a familiar feature of law as it occurs in any definition containing a self-reference. The best known paradox are the self-amendment cases where sovereign parliaments have taken action to limit their sovereignty.[313] Paradox is present in the circular meaning of 'company' in the phrase 'the best interests of the company as a whole.'[314]


110. Teubner argues that self-reference is a basic paradox at the heart of law. He sees it as revitalising our understanding of indeterminacy in law. The law can only be determinate if the law says it is, that is if it is based in some super-norm. But this super-norm is the subject of the definition of law itself so the paradox of self-reference enters.[315] The law seeks to suppress this but in doing so it conceals that contradictory statements of doctrine can be both right and wrong. It does this by denying that there is a form of reasoning which invents reasons why one statement in a particular context is right and the other is wrong. Teubner sees the work of law as accepting this paradox. It reflects the reality of a world which is itself paradoxical. The result is that it would be even more paradoxical to seek to locate, construct or explain these paradoxes.[316] He uses the increasing employment of balancing tests in legal doctrine, general clauses in contracts and sociological and economic legal theories to demonstrate that the law recognises its paradoxical nature.[317] He seeks to 'deparadox' the circular reference to the company by showing that the legal person, the enterprise and the association of shareholders are also clearly identified spheres of action which are not identical and which only overlap in the company. He names this centre of collective action the 'collectivity' which can be seen working through the corporate organs. The corporate organs and not the association of members determine the extent of the collectivity.[318] This leads to an assertion that:


none of the resource providers, neither the factor of capital, nor that of labor, nor that of management, nor indeed the factor of state control, has any natural claim to 'sovereignty over the association.'[319]

Antinomy

111. Antinomy is a form of paradox which produces a self-contradiction by accepted ways of reasoning, that is, a contradiction between two assertions for each of which there seem to be adequate grounds.[320] One of the features of the common law are the number of rules which have matched pairs of equal standing which point to opposite results.[321] Karl Llewellyn listed over 70 conflicting paired rules for interpreting statutes[322] and a similar number for interpreting precedents.[323]


112. It has also been claimed that law, with its adversarial processes, merely shows the features of competition and that antinomian reasoning is a feature of this.[324] Again any conflict is unlikely to be just about one rule. But the prevalence of the paired rules and arguments shows that it is systematic in law and goes beyond the opportunism of adversarial argument in individual cases. It is deeply entrenched in the legal system and any legal rules for companies need to be made with it in mind.


The death of law

113. Antinomy has another nuance which derives from John Bunyan and the Muggletonians who developed the antinomian oppositions between Legality and the Gospel of Forgiveness, the Moral Law and the Gospel of Love. A 'very judicious man' Legality, tempted Christian to go to his house where he would have perished except for Evangelist who rescued him. Evangelist explained that 'Legality' was a cheat and that 'by the works of the Law no man living can be rid of his burden.'[325]


114. Goodrich takes up this point in dealing with a particular antinomy which is ever present in law:


The etymological root of determinacy is terminus, connoting both boundary and conclusion or end. The question becomes what is it that ends in the law? What is it that ends with the law? With this law? A question of the intellectual history of jurisprudence and of doctrine that takes the analyst deep into the unconscious structures of law.
115. He argues that the pre-modern view of law recognised that the law had an origin and purpose outside of itself in justice, equity and reason from which it could not be separated as the maxims of Roman law showed.[326] This was imported in a limited way into, but is now suppressed by, the common law with the adoption of ratio from Roman law with all its ambiguities of 'cause', 'purpose', 'rationale', 'process', 'faculty', 'sense' and 'intention.'[327] This separation of the law from its origin and purpose is described by Goodrich, from the meaning of 'terminus' as a 'conclusion', as 'the death of law'. Goodrich argues that this death represents a more profound indeterminacy[328] which occurred in the actions of positivists to rid the law of indeterminacy. In doing so they cut law off from these causes and purposes by seeking to ground it in 'the brute fact of a system of norms' which cut it off from justice and judgment.[329] Lawyers become technicians and law becomes no more than what lawyers do and its origins and purposes are 'crippled' by 'a series of pragmatic, actuarial and disciplinary administrative practices.' These represent 'the hyper-inflation of legal practices and regulation.'[330]


116. Goodrich's analyses present the administrators of company law with a considerable problem. Many parts of company law have little to do with morality.[331] This is exacerbated in the revolutionary change in financial capitalism which Mandel has described. Truth, honesty and integrity are great and enduring values[332] but they only have meaning in a context. If contexts are undergoing rapid transformations they will produce varying answers and disagreement about the interpretation of standards. Endicott dismisses indeterminacy where it is the result of deconstructive techniques as merely 'exposing the law to debate but not to argument.'[333] But this is too cursory and quick a rejection. It is arguable that western law and the common law, with its adversarial techniques, in particular, have used deconstructive techniques for centuries if not millenia.[334] Goodrich has re-exposed an ever present tension in the law which is embodied in the concept of justice[335] and which Aristotle observed in his Politics.[336] Justice also requires that like be treated alike. This tension is made worse by the passing of time and changes in social, economic and political structures. Awareness of this can be seen underlying arguments whether rules are better than standards which appeared in Australian corporate law as the 'fuzzy law' debate of the early 1990s particularly in respect of related party transactions.[337]


Unpredictable events and inexplicable chains of causation

117. Comparison of legal concepts with phenomenon in other forms of knowledge can use likenesses in two ways: as a metaphor for the legal concept which is substituted for it in the same context, and, as metonymy in which the other phenomenon is used to enable us to see the legal concept in a different context.[338] Likening law to science has been influential in legal thought and the borrowed concept of 'the doctrine of certainty' appears to have set the common lawyers in the seventeenth century on their quest for certainty in the law.[339] Gierke's view of the company was based on a nineteenth century understanding of an organism although he was conscious of its limitations.[340] Holmes, Pound and Dewey and many of the Realists sought to use social science to find the predictability which was missing in legal doctrine.[341] Some legal writers still consciously adopt a scientific methodology in studying law as Clark does with his evolutionary model of the four stages of capitalism.[342] Such comparisons are, however, problematic. Evolutionary theory in science is a cultural construct but it is applied to physical organisms. To apply it to metaphysical constructs such as law or the company which have no physical existence conceals assumptions and lacks empirical evidence.[343] Finally lawyers are generally bad at science.[344]


An absolutely unpredictable event

118. Indeterminacy in physics provides metaphors for modelling law. This first form occurs in quantum physics. There is no chain of events. The quantum jump of a photon 'is supposed to be an absolutely unpredictable event which is controlled neither by causal laws nor by the coincidence of causal laws but by probabilistic laws alone.'[345] The photons show a statistical regularity which permits statistical predictions to be made about their aggregate behaviour but the individual photon is not 'casually determined.' [346]


119. No event company law deals with will be causeless in this sense but it may be unpredictable. It provides a metaphor for the new case which throws up an issue which has not previously been determined.[347] In such a case there may be some consistency, compatibility, congruence or even intuition about the 'aggregate behaviour' of the law which gives some sense to the overall trend of the law even if it has no predictive power in particular cases.


Interference produced by two or more causal chains

120. A second form of indeterminacy in physics occurs when two or more independent 'causal chains ... happen, accidentally, to interfere at the same time and place and combine in bringing about the chance event.' [348] Each of the chains of events may be subject to causal explanation but the coincidental timing of the two events may not be. This analysis assumes that such systems are the sum of their parts, as one or more linear equation for each of which there is one outcome. The result requires the simple addition of each of the outcomes.[349]


121. This is a common phenomenon in law. Sampford uses an analogy of chains in describing legal relations in his social mêlée model of law. One of his examples can be easily changed into an example from company law.[350] Company law is frequently administered at the junction of events where one event has intersected with others. Corporate insolvency often leads to inquiries which reveal unrelated breaches of directors' duties.


Complexity, non-linear or chaos theory

122. Non-linear theory, the best known of which is complexity or chaos theory, has impinged on this last form of analysis. It is based on the observation in sciences and mathematics that there are phenomenon and expressions in which apparently insignificant changes in starting conditions make it impossible to predict how the phenomenon or calculation will develop. A single cause can lead to a huge range of effects.[351] They show synergy in the sense that they are more than the sum of their parts.[352] They have other features. One is bounded instability and is distinguished from stability and instability. It is not possible in the vicinity of the border to make clear cut distinctions between starting combinations which produce stability and those which produce instability. Small variations will produce stability and instability. The geometrical shapes of the border, which repeat a similar pattern but at no measurable scale, are called fractals. By altering the starting conditions it is possible to manipulate the process to produce a general pattern but not to produce a particular result.[353]


123. The principles which produce some of these patterns are being unravelled. There is feedback within systems. This feedback includes strange attractors, sets of points to which movement in the system are drawn, which are complex and oscillate.[354] These produce unstable behaviour but within bounds.[355] There are dissipative systems. These use positive feedback to amplify fluctuations in their environment to disrupt existing systems of behaviour, the variety within the system is structured by correlations between its parts so that it is self-organised, a small change may suddenly turn the system from one kind of behaviour to another and can evolve suddenly, unexpectedly and can become increasingly more complex. A small change in such a system may not have a small effect.[356]


124. Chaos theory has implications for other scientific metaphors which have been used to explain law. Evolution, as noted, has been used to explain both the mechanism and direction of development in law. Its use as a filter, or a trial or error mechanism, rather than the idea that evolution is 'goal orientated' has been more a more successful and accurate metaphor.[357] Sampford, in his model of law as a mêlée, defines mêlée as:
     
     
a fluid, constantly changing set of interactions in a complex struggle between a large number of groups and institutions.[358]
125. The law is a microsystem of this larger system.[359] His theory of law, in particular that it is marked by indirect achievements, would appear to parallel chaos theory, a disorder with limits. This is not an analysis he applies.[360] He rejects other theories of law for looking for systems at all in a disordered society.[361] Chaos theory is now being applied to the social sciences,[362] to law[363] and to management, including corporate management[364] but not without some conflict about the appropriateness of its application. It has not been proven that any system involving humans is non-linear but it is unlikely that unpolluted data would be ever acquired to do this.[365]


126. Chaos theory indicates that the law and the corporate organisations it regulates are all the result of historical contingencies. The rules stated in legal doctrine will interact with each other and the chance events of their invocation to further develop doctrine.[366] These rules also represent the end of a path from the interaction of previous chance events. The organisations they regulate are also the process of a similar development. Other forms of the business firm, apart from the company, have existed. Some are extinct and could not be further developed without retracing evolutionary steps or reviving them. The existing ones may not be the best possible ones. They are merely the survivors from particular historic periods.[367]


127. Legal rules can be seen as attractors, and conflict between rules, can be likened to strange attractors. The recognition that small variations in starting conditions can affect whether an action lies in or outside the border of a legal rule reflects the rule versus standard debate. The common law implicitly recognises this with its drift to a standard of reasonableness which can be seen as a standard 'poised on the boundary between order and chaos.'[368] Chaos theory offers a new insight into why legal reasoning pays attention to small details. It offers a similar view of models of law reform. Results of law reform in company law have often been unexpected. It was thought, for example, that only the largest undertakings would seek limited liability under the Companies Act 1856 (Eng).[369] It can be seen in the reasoning and interpretative systems use in law. It is rare for the meaning of a legal rule and its application to be considered in isolation from other legal rules. The common law, with its system of precedent, always involves the consideration of the puzzle of the two conflicting rules, which also contain each other, for determining the ratio of previous decisions.[370] Generally a cluster of rules from further clusters of statutes and cases will be interpreted together.[371] This is familiar from Dworkin's hard cases where there are conflicting rules which could be applied. These rules may generate a result which after the event is subject to doctrinal explanation and clarification, even if it could not have been predicted and justified in advance. [372]


128. Chaos theory has wider implications. Rock has examined the development of law on management buyouts in Delaware. He proposes a model in which the decisions of the courts of Delaware are a source of norms for company directors. He distinguishes norms from laws. Norms are the internalised rules for behaviour which are important for individuals to have a feeling of self-worth. He argues that the smallness of the corporate directors and legal communities in New York and Wilmington, Delaware with its own newspapers and court system provides a means by which the norms are created by feedback through lawyers from the courts to the directors. He notes that the Delaware courts concern themselves with 'mushy' statements of fiduciary duties which are like morality tales rather than with the enunciation of principles.[373] What Rock observes need not be a one way process. It is possible that the open ended standards used in fiduciary law means that the courts will be influenced by information about what are accepted as reasonable practices in the corporate community. The Delaware courts are like the Wall Street Journal just another, even if more official, source of such information.


129. Chaos theory provides other insights. A transaction which in one context is not justiciable becomes so. It suggests the way in which legal doctrine moves over time.[374] The dispute in legal theory over whether discretion is also law can be seen as a discussion over interrelated phenomenon. It suggests that the layers of connectivity between power and knowledge in the corporate form may contain similar patterns but may produce different effects. In companies where control is widely dispersed small changes may make considerable difference to that control, as well as the reverse.[375] It offers some explanations for the stockmarket which has defeated any attempts to develop regular programs to predict the price movement of a company shares.[376] It has been used to justify Hayek's argument against the regulation of economic activity because it shows that long term planning will not work and that all institutions involved in something as complex as the economy need to be flexible and adaptive.[377]


130. To suggest that the law is undetermined by analogy to chaos theory invites the response that it may be so complexly determined that no predictions can be reliably made at this time. But, with further progress in legal studies, its determined nature will become clear in the same way as non-linear theory now shows there are patterns in physics and mathematics.[378] If law's special feature is its binding power and the requirement that we act in conformity with it and, if we fail to, that we are held accountable under it there are problems with this response. For it to be so complexly determined that it fails to bind and fails to make accountable produces, at this time, the same appearance as indeterminacy.


Modelling indeterminacy in company law

131. The limits placed on reasoning in law by limitations of language, the absence of the syllogism, an over-abundance of paradox produced by self-referring definitions and the tension between the spirit of the law and the letter of the law produce particular problems in company law. Legal principles are stretched tight over varying forms of companies which have their own uncertainties of language, paradoxes and competing merits. Added to this are the numerous ways in which transactions bring the intangible law in contact with the metaphysical corporate form. These one-off events, coincidental chains of causations, bounded instabilities, strange attractors, recurring fractals and contingent synergies provide new metaphors for the infinite ways in which legal rules can interact with the preferred form for the raising of capital for enterprise and profit. It is difficult to conclude that there is just one way to deal with uncertainty in the regulation of the corporate form.

Notes

[1] Holmes OW, 'The Path of the Law in Oliver Wendell Homes, Collected Legal Papers (New York: Harcourt, Brace, 1920)
[2] O'Neill O, Towards Justice and Virtue: A Constructive Account of Practical Reasoning (Cambridge: Cambridge University Press, 1996) 187. Other virtues she identifies are also relevant in the context of the company. The 'executive virtues' could apply both to corporate decision making and the actions of individual executives. These virtues include: 'self-respect, self-control and decisiveness; courage and endurance, as well as numerous contemporary conceptions of autonomy; insight and self-knowledge, and various traits that are cognitive and practical, such as efficiency, carefulness and accuracy.' She also identifies substantive social virtues. These include 'altruism, from sympathy and beneficence to care and concern' but she notes that these virtues are controversial. Finally there are the superogatory virtues which are 'eptimomized in the action of saints and heroes.' These, because they go beyond duty, must be regarded as optional. Ibid. 187-89.

[3] Grey TC, 'Bad Man from Olympus', New York Review of Books 13 July 1995, 4.

[4] Gilmore, his authorised biographer, attacked this 'myth' which depicted him as 'the tolerant aristocrat, the great liberal, the eloquent defender of our liberties, the Yankee from Olympus.' Gilmore drew attention to the darker side of Holmes. Holmes he said, was 'savage, harsh, and cruel' and 'a greater man and a more profound thinker than the mythical Holmes ever was.' Ibid 4. Holmes may have agreed. He loved Rabelais. Sometimes in Washington he attended burlesque shows and was said to have remarked, 'I thank God I am a man of low tastes.' When the newly inaugurated President Roosevelt called on him after his retirement he found him reading Plato. 'Why do you read Plato, Mr. Justice?' he asked. 'To improve my mind, Mr. President,' replied the 92 year old man.

[5] Holmes OW, The Common Law (Boston: Little Brown, 1949) 1.

[6] Holmes, above n 1, 167.

[7] In the 'Preface' to A Selection of Cases on the Law of Contract (Boston: Little, Brown & Son, 1871) viii Langdell wrote: 'Moreover, the number of fundamental legal doctrines is much less than is commonly supposed; the many different guises in which the same doctrine is constantly making its appearance, and the great extent to which legal treatises are a repetition of each other, being the cause of much misapprehension. If these doctrines could be so classified and arranged that each should be found in its proper place, and nowhere else, they would cease to be formidable from their number.' Holmes said of Langdell. The: 'ideal in the law, the end of all his striving, is the elegantia juris, or logical integrity of the system as a system. He is, perhaps, the greatest living legal theologian. But as a theologian he is less concerned with his postulates than to show that the conclusions from them hang together. ... so entirely is he interested in the formal connection of things, or logic, as distinguished from the feelings which make the content of logic, and which have actually shaped the substance of law. The life of the law has not been logic; it has been experience. The seed of every new growth within its sphere has been a felt necessity.' Holmes OW, 'Review of CC Langdell, Summary of the Law of Contracts and WR Anson, Principles of the Law of Contract' (1880) 14 American Law Review 233, 234.

[8] Beale Joseph H, A Treatise on the Conflict of Laws (Cambridge, Mass: Harvard University Press, 1916) 135.

[9] Perry AL, Political Economy (New York: Scribner, Armstrong & Co, 18th ed) 248. Kennedy D, 'The Role of Law in Economic Thought; Essay on the Fetishism of Commodities' (1985) 34 American University Law Review 939, 941-58.

[10] Spencer H, The Man Versus the State (London: Williams & Norgate, 1884) 15-16.

[11] Holmes thirty years before had written: 'In the last resort a man rightly prefers his own interest to that of his neighbours. And this is true in legislation as in any other form of corporate action. All that can be expected from modern improvements is that legislation should easily and quickly, yet not too quickly, modify itself in accordance with the will of the de facto supreme power in the community, and that the spread of an educated sympathy should reduce the sacrifices of minorities to a minimum. But whatever body may possess the supreme power for the moment is certain to have interests inconsistent with others which have competed unsucessfully. The most powerful interests must be more or less reflected in legislation; which, like every other device of man or beast, must tend in the long to aid the survival of the fittest.' 'Summary of Events: The Gas Stokers' Strike' (1873) 7 American Law Review 582, 583.

[12] [1905] USSC 100; 198 US 45 (1905).

[13] In Tyson & Bro v Banton [1927] USSC 65; 273 US 418 (1927) Holmes J, 466, dissented to uphold a law restricting the resale price of a theatre ticket to 50 cents above the box office price. He wrote: 'the legislature may forbid or restrict any business when it has sufficient force of public opinion behind it.'

[14] Hart HLA, 'American Jurisprudence Through English Eyes: The Nightmare and the Noble Dream' [1977] Georgia Law Review 968, 983.

[15] Gilmore, who argues that Holmes was a Langdellian formalist nominates Cardozo as the harbinger of this jurisprudence. Gilmore G, The Ages of American Law (New Haven: Yale University Press, 1977) 48. Gilmore argued that the Storrs lectures delivered by Benjamin Cardozo at Yale Law School in 1921 opened this age. Gilmore G, 'The Storrs Lectures: The Age of Anxiety' (1975) 84 Yale Law Journal 1022. In that lecture Cardozo claimed that judges made law by adopting the methods of philosophy, history, tradition, sociology. Duxbury quotes contemporaries who referred to it as 'hopeless nihilism'. Duxbury N, 'Jerome Frank and the Legacy of Realism' (1991) 18 Journal of Law and Society 175, 193. Gary Minda argues that the Age of Anxiety disappeared with the new consensus theories of law generated after WWII but the Age of Anxiety then returned. Minda G, Postmodern Legal Movements: Law and Jurisprudence at Centuries End (New York: New York University Press, 1995) 283 note 2.

[16] Duxbury N, 'The Reinvention of American Legal Realism' (1992) 12 Legal Studies 137.

[17] Gilmore, above n 15, 77.

[18] Cardozo BN, The Nature of the Judicial Process (New Haven: Yale University Press, 1921) 29, 166.

[19] Grey, above n 3, 4. Holmes may have agreed. He loved Rabelais. Sometimes in Washington he attended burlesque shows and was said to have remarked, 'I thank God I am a man of low tastes.' The newly inaugurated President Franklin D Roosevelt called upon the retired justice and found him reading Plato. 'Why do you read Plato, Mr. Justice?' 'To improve my mind, Mr. President,' replied the 92-year-old man. Morris Cohen wrote of Holmes' jurisprudence: 'But no one group can claim Justice Holmes as its own unless it shares respect for the complexity of the legal situation and exercise the same caution against hastily jumping from one extreme error to the opposite.' Cohen MR, 'Justice Holmes and the Nature of Law' (1931) 31 Columbia Law Review 352, 363.

[20] Elliott DE, 'Holmes and Evolution: Legal Process as Artificial Intelligence' (1984) 13 Journal of Legal Studies 113, 116-17.

[21] White GE, 'The Rise and Fall of Justice Holmes' (1971) 39 University of Chicago Law Review 51, 56.

[22] Posner RA, Problems of Jurisprudence (Cambridge, Mass: Harvard University Press, 1993) 26-7. Dewey asserted: 'that law was best seen as an empirical social science.' Schlegel JH, American Legal Realism and Empirical Social Science (Chapel Hill: University of North Carolina Press, 1995) 8. Moskowitz DH, 'The Prediction Theory of Law' (1966) 39 Temple Law Quarterly 413. The debt of the predictive theory of law to the pragmatists is shown by William James' statement: 'The truth of an idea is not a stagnant property inherent in it. Truth happens to an idea. It becomes true, is made true by events. Its verity is in fact an event, a process: the process namely of verifying itself, its veri-fication. Its validity is the process of its validation.' James W, Pragmatism: A New Name for Some Old Ways of Thinking (New York: Longmans, Green & Co, 1910) 201.

[23] Pound later denied that he was a Realist but had similar interests as a result of his sociological perspective. Law was not just the rules but included the other elements which drove legal development. Pound was concerned with the values which underlie the law and how they ought to be developed and applied. Cotterell suggests that it has its origins in the disorganisation of the US legal profession and frontier life. The isolated court houses, in the absence of legislatures, became the focus of government. Cotterell R,The Sociology of Law: an Introduction (London: Butterworths, 1984) 156 Pound saw the judge as a social engineer and was critical when judicial values diverged too much from those of the people which he derided as 'mechanical jurisprudence'. Pound R, 'Mechanical Jurisprudence', (1908) 8Columbia Law Review 605. Pound supported legislation initially as clarifying confused doctrine and suggesting lines of development to the judges. The measures of values to be used by the judges proved elusive and by the end of his life he saw the judges as embattled defenders of legal reason surrounded by mindless legislative rule making. Cotterell, above n 23, 162.

[24] Dewey J, 'Logical Method and Law' Cornell University Law Review 17, 21 cites Holmes.

[25] Lord Mansfield CJ R v Dawes and Martem [1767] EngR 81; (1767) 4 Burr 2120. The then Attorney-General, Michael Lavarch, introduced the corporate law simiplification program with the objective of relieving 'business from the uncertainty caused by constant change to the Corporations Law'. Lavarch M, 'The Government's Approach to Corporate Law Reform' (1994) 4 Australian Journal of Corporations Law 1, 3.

[26] Goodrich P, Law in the Courts of Love: Literature and Other Little Jurisprudences (London: Routledge, 1996) 201. Letizia Gianformaggio considers certainty in this context to mean: 'But in order for the decision, the sole decision that has to count as such, to be totally predictable and verifiable it must (= can only) be the sole possible outcome of a procedure, the obligatory end of a road that could have been anticipated and gone over again.' Gianformaggio L, 'Legal Certainty, Coherence and Consensus: Variations on a Theme by MacCormack' in Nerhot P (ed) Law, Interpretation and Reality: Essays in Epistomology, Hermeneutics and Jurisprudence (Dordrecht: Kluwer Academic Publishers, 1990) 402, 403.

[27] Bix B, Law, Language and Indeterminacy (Oxford: Clarendon Press, 1993) 1.

[28] DeMott notes that it has largely been developed through reasoning by analogy. She believes it defies more specific definition as it arises in factual situations difficult to designate in advance which are generally in the interstices of other legal principles as a result of its origin in the corrective equity of the Chancellor. DeMott DA, "Beyond Metaphor: An Analysis of Fiduciary Obligation (1988) Duke Law Journal 879, 881. Ruder quotes Frankfurter J in SEC v Chenery [1943] USSC 32; 318 US 80(1943): 'to say that a man is a fiduciary only begins analysis; it gives directions to further inquiry. To whom is he a fiduciary? What obligations does he owe as a fiduciary? In what respect has he failed to discharge these obligations?' Ruder DS, 'Duty of Loyalty - A Law Professor's Status Report' (1985) 40 Business Law 1383, 1386.

[29] Mason A, 'Themes and Prospects' in Finn PD (ed) Essays in Equity (Sydney: Law Book Co, 1985) 246, 246. He observed later that: 'The quest for a precise definition which identifies the characteristics of the fiduciary relationship, in particular other relationships which attract equitable relief, continues without evident signs of success.' Mason A, 'The Place of Equity and Equitable Remedies in the Contemporary Common Law World (1994) Law Quarterly Review 238, 238. His view is supported by Glover. Glover J, Commercial Equity: Fiduciary Relationships (Sydney: Butterworths, 1995) 22-3.

[30] Keen I, Knowledge and Secrecy in an Aboriginal Religion (Oxford, Clarendon Press, 1994) 12-15, 242-4. Munn observed the simplicity of Walpiri design elements which can stand for a wide range of meanings. Munn N, Walbiri Iconography: Graphic Representations and Cultural Symbolism in Central Australian Society (Ithaca, Cornell University Press, 1973).

[31] They were to have equity 'before their eyes', to consider the right and equity before the strict and exact rule and reminded to believe 'in the heart' in order to do justice. Goodrich, above n 25, 180-1.

[32] Daube notes that in classical times '[t]he have-nots break the law, the haves skirt it.' He recognised that there were countless forms of these but reduced them to three types: '(1) Where a law prohibits a certain transaction - sale or gift or interest - an alternative transaction is substituted which will produce the nearest effect - gift plus countergift for sale, sale at a nugatory price for a gift, a late-repayment-penalty with an impossibly early repayment-date for interest. (2) Where a law debars a certain group from a transaction - a governor from money-lending in his province - an interposita persona is used - he does business through his cousin ... (3) Where a law attaches an advantage or disadvantage to a certain quality, this is indeed acquired or shed but in a fashion that drains the change of substance.' Daube D, 'Fraud No. 3' in MacCormick N and Birks P, The Legal Mind: Essays for Tony Honoré (Oxford: Clarendon Press, 1986) 1, 1-2.

[33] Goodrich, above n 25, 183.

[34] Maclean I, Interpretation and meaning in the renaissance: the case of law (Cambridge: Cambridge University Press, 1992) 3-11, 89-95, 207-14. There was from the thirteenth century widespread criticism of the view that the law could be known objectively and stated with certainty. A new maxim emerged: the person who knows how to dissimulate knows how to rule. The causes of this were also recognised in issues which are familiar to contemporary lawyers: the incorporeal nature of legal concepts, the temporal nature of judicial practice, the future orientation of legal transactions and the uncertain, probable or simply conjectural character of doctrinal reason. In a brief account of the common law tradition he notes that it was shaped by the influences of Roman law. Ibid 181-6. Goodrich P, Languages of law: from logics of memory to nomadic masks (London: Weidenfeld & Nicolson, 1990), 83-90.

[35] Ibid 152-6.

[36] Galbraith JK, The New Industrial State (Boston: Houghton Mifflin, 3rd ed rev, 1978) 76-7 noted that General Motors had little in common with most other companies. 'The answer is that there is no such thing as a corporation. Rather there are several kinds of corporations all deriving from a common, flexible and highly accommodating legal framework. Some are subject to the market; others reflect varying degrees of adaptation to the requirements of planning and the needs of the technostructure. The person who sets out to study buildings on Manhattan on the assumption that all are alike will have difficulty in passing from surviving brownstones to the skyscrapers. And he will handicap himself even more if he imagines that all buildings should be like brownstones and have load-carrying walls and that others are abnormal. So precisely it is with the study of corporations.'

[37] The Corporations Law introduces another element into this category with the power of the Australian Securities Commission to waive compliance with various provisions. While it must be exercised in accordance with legal rules for understanding rules for exercising discretions some observers have been unable to detect a pattern and see it as favouring sides in takeovers. Pierpont, 'ASC Dosen't Rule the Waves - It Waives the Rules' Australian Financial Review (24 January 1997) 76, 42.

[38] Krygier M, 'Critical Legal Studies and Social Theory - A Response to Alan Hunt' (1987) 7 Oxford Journal of Legal Studies 26, 34-7.

[39] Gordon RW, 'American Law Through English Eyes: A Century of Nightmares and Noble Dreams' (1996) 84 Georgetown Law Journal 2215, 2238-9 referring to Duxbury N, Patterns of American Jurisprudence (Oxford: Clarendon Press, 1995) 501-2.

[40] There are a number of writers who do take indeterminacy seriously. See McEwin R I, 'Public Versus Shareholder Control of Directors' (1992) 10 Company and Securities Law Journal 182. McEwin notes that 'there is a widespread belief that director misbehaviour is not sufficiently penalised.' One explanation is a perception that non-majority shareholders have little control over setting and enforcing directors' standards of behaviour. Ibid 182. He also observes: 'Courts face the same problems setting director standards. They do not have the information to set standards.' Ibid 201. He argues that regulatory agencies do not have enough information to set standards for directors which may need to vary from industry to industry: 'However, the development of the corporation as a separate legal identity has clouded the true agency relationship between shareholders and directors and effectively prevented shareholders from ensuring that directors act in the best interests of shareholders when market forces are ineffective (due to lack of competition in product and capital markets' Ibid 202. He argues that we know little about either the public or private enforcement of these rights. 'Certainly, the law regulating company directors is so uncertain that considerable resources are used to fight important cases in the courts.' He argues that these to be subject to private negotiation and enforcement. Ibid 203-4.

[41] D'Aprix RM, In Search of a Corporate Soul (New York: Amacon, 1976) 'Chapter 1 The American Corporation: Dogma and Turmoil', 7-29. Derham DP, 'Theories of Legal Personality' in Webb LC (ed) Legal Personality and Political Pluralism (Melbourne: Melbourne University Press, 1958) 1. Stoljar SJ, 'The Corporate Theories of Frederic William Maitland' in Webb LC (ed) Legal Personality and Political Pluralism (Melbourne: Melbourne University Press, 1958) 20, 43-4. Stoljar SJ, Groups and Entities: An Inquiry into Corporate Theory (Canberra: Australian National University Press, 1973) iii, notes that '[w]hat is commonly known as 'corporate personality' raises difficult questions which have been amongst the most controversial in law and legal theory.' He adopts a different approach but his book shows how extensive this issue was discussed in the 30 years prior to its publication. While discussion has been continued over the 'nexus of contracts' model it does not have the same depth or link to wider legal theory as it did in this earlier period. Dan-Cohen M, Rights, Persons, and Organizations: A Legal Theory for the Bureaucratic Society (Berkeley, Calif: University of California Press, 1986) Dan-Cohen describes the the prevailing legal theory of the group is based on a two-tier conception of society that comprehends only individuals and government. This tends to either personify organizations, investing them with the same rights and responsibilities as individuals, or to dissolve them into a mere aggregation of individuals that lacks independent jurisprudential significance. Equating organizations with individuals ignores the collective character of organizational decisionmaking. Aggregation falsely assumes that the decisions and goals of an organization can be reduced to those of its individual members.

[42] Shamir uses a socio-historical analysis to show that American lawyers used the legal uncertainty created by New Deal legislation to protect and improve their position in the American social order. The elite lawyers resisted the extension of discretion in the hands of government officials to maintain the benefits which they received from the 'rule of law.' The Realist lawyers who joined the New Deal administration abandoned their radical critique of law to embrace the 'rule of law' and become government officers. Shamir's analysis is flawed in his failure to recognise the altruism of both groups, particularly people like Jerome Frank. 'Book Note: The Relevance of Moral Agendas' (1996) Harvard Law Review 846-51 (a review of Shamir R, Managing Legal Uncertainty: Elite Lawyers in the New Deal (Durham, NC: Duke University Press, 1995). Llewellyn K, 'Across Sales on Horseback' (1939) 52 Harvard Law Review 725, 741. Llewellyn speculated that most disputes between business people were resolved by arbitration in the United States in the 1930s and that only bitter personal antagonisms go to court. Llewellyn K, 'On Warranty of Quality, and Society' (1936) 36 Columbia Law Review 699, 711.

[43] Eisenberg MA, The Nature of the Common Law (Cambridge: Harvard University Press, 1988) 156-57 echoes the predictive theory of Holmes. He writes: 'What then does the common law consist of? It consists of the rules that would be generated at the present moment by institutional principles of adjudication. ... To determine the content of the common law, courts do not begin with doctrinal propositions adopted in past texts and work backward to determine their validity; they begin with a set of institutional principles and work forward to generate legal rules. These institutional principles instruct the courts that in determining the law they should take account not only of doctrinal propositions promulgated by officials of the relevant jurisdiction, but also of the criticism and understanding of those propositions expressed in the professional discourse, doctrinal propositions established in the professional literature, and applicable social propositions. The rules generated by the interplay among those propositions under the institutional principles of adjudication are what the courts conceive to be law, and properly so.'

[44] Benson B, 'The Spontaneous Evolution of Commercial Law' (1989) 55 Southern Economics Journal 644. Sealy LS, Company Law and Commercial Reality, Sweet and Maxwell, London, 1984, 87-8.

[45] This is an international version of the Delaware race to the bottom or the top which is the subject of extensive writing in corporate law: Baysinger B and Butler HN 'Race to the Bottom v Climb to the Top: the ALI Project and Uniformity in Corporate Law' (1985) 10 Journal of Corporation Law, 431; Fischel D 'The Race to the Bottom Revisited: Reflections on Recent Developments in Delaware's Corporations Law' (1982) Northwestern University Law Review, 913; Hazen TE, 'Corporate Directors Accountability: the Race to the Bottom; the Second Lap' (1987) 66 North Carolina Law Review, 171; Winter RE, 'The 'Race to the Top' Revisited: a Commentary on Eisenberg', (1989) 89 Columbia Law Review, 1526.

[46] Dezalay notes that the three way relationship of 'firm-state-market' has been disrupted and is now 'highly problematic.' Dezalay Y, "Professional Competition and the Social Construction of Transnational Regulatory Experience" in McCahery J, Picciotto S and Scott C (ed) Corporate Control and Accountability: Changing Structures and the Dynamics of Regulation (Oxford: Clarendon Press, 1993) 203, 206-7.

[47] Phillip Lipton claimed that the takeovers in the United States had been ''sold' by salespeople who were part of a 'tremendous infrastructure built up to do these transactions.' 'General Discussion following SG Winter, 'Routines, Cash Flows and Unconventional Assets: Corporate Change in the 1980s' in M Blair (ed) The Deal Decade: What Takeovers and Leveraged Buyouts Mean for Corporate Governance (Washington, DC: Brookings Institution, 1993) 88, 89.

[48] Y Dezalay, 'Technological Warfare: The Battle to Control the Mergers and Acquisitions Market in Europe' in Y Dezalay and D Sugarman D (ed) Professional Competition and Professional Power: Lawyers, Accountants and the Social Construction of Markets, London, Routledge, 1995, 85-101. Parkinson outlines the cultural factors in the European Union which have made takeovers or a market in corporate control significant in other jurisdictions. He questions the desirability of a law which facilitates such transactions in the European context. Parkinson JE, Corporate Power and Responsibility: Issues in the Theory of Company Law (Oxford: Clarendon Press, 1993) 147-151.

[49] McCahery and Picciotto argue that the irrationality of a number of laws in this area arises partly from the rise of multinational financial firms but also from the relationship of the government with private sector lawyers who have the power to legitimise particular transactions. McCahery J and Picciotto S, 'Creative Lawyering and the Dynamics of Business Regulation' in Dezalay Y and Sugarman D, Professional Competition and Professional Power: Lawyers, Accountants and the Social Construction of Markets (London: Routledge, 1995) 238, 266. Dezaley makes the point more forcibly describing how the 'mystery' of the law's authority is deeply embedded in their false appearance of impartiality: 'It must also be recognised that the proponents ... have a personal interest in the matter. They are not simply analysts. They are actors in the drama. ... They wear several hats: as producers of learned discourse; as impartial experts serving the public weal; and as 'merchants of regulatory knowledge' if not to the highest bidder then at a very high price. Can anyone imagine a better example of the relationship between law and economics than these 'business professionals' who personify the interweaving of market, state and academia? They are courtiers, bowing now to politics, now to business, now to both at once; and then to the occult mystery of the 'law', whether social or economic. And as Thompson reminds us, that element of the mystery is vital. The law cannot support the claims of a dominant class to rule unless it seems to be - and actually sometimes is - impartial.' Dezalay, above n 48, 77-8. Dezalay has also noted how these experts have 'depersonalised' themselves and are blind to the knowledge that their information has been produced in a market and is affected by this condition of its production. This, however, aids the social credibility of law. Dezalay, above n 46, 203.

[50] Dezalay, note 48, 78-9, 86. Drahos P, 'Global Law Reform and Rent-Seeking: The Case of Intellectual Property' (1996) 7 Australian Journal of Corporate Law 45, 45. Blakeney M 'Intellectual Property Reform in the Asia Pacific Region' (1996) 7 Australian Journal of Corporate Law 23, 29-44.

[51] Dezalay writes: 'Key inventions for the development of the M & A market - such as leveraged buyout or 'poison pills' - bring into play rules of the game which are independent of the economic field, such as those which subordinate hierarchy and prestige to the mastery of a specific technique. This holds good for the autonomy of these professional fields: it is at this price that this particular category of 'men of affairs' distinguishes itself from mere go- betweens, in order to gain the authority and social advantages which are the privilege of the expert.' Dezalay, above n 48, 79-80. See, for another example, Sercu P and Vanhulle C, 'Financing Instruments, Security Design, and the Efficiency of Takeovers: A Note' (1995) International Review of Law and Economics 373-393.

[52] 'This, then, is the essence of commercial law - the accommodation of principles, rules, practices and documents fashioned by the world of business: the facilitation, rather than the obstruction, of commercial development. It is part of the genius of the common law that despite the ritual and formalism of its earlier life it has proved able to respond to the challenges of industrial growth. ' Goode RM, Commercial Law (Harmondsworth: Penguin Books, 1982) 984

[53] Kirby M, 'Rethinking Company Law and Practice' (1995) 5 Australian Journal of Corporations Law 176, 179 quoting Lord Wilberforce, 'Law and Economics' in Harvey PW (ed) The Lawyer and Justice (London: Sweet & Maxwell, 1978) 73, 75.

[54] 'Another infirmity of a Commonwealth is the immoderate greatness of a town, when it is able to furnish out of its own circuit the number and expense of a great army; as also the great number of corporations, which are as it were many lesser Commonwealths in the bowels of a greater, like worms in the entrails of a natural man. To may be added, liberty of disputing against absolute power by pretenders to political prudence; which though bred for the most part in the lees of the people, yet animated by false doctrines are perpetually meddling with the fundamental laws, to the molestation of the Commonwealth, like the little worms which physicians call ascarides.' Hobbes T, Leviathan (Oxford: Blackwell, 1948) Chapter 29.

[55] R v Dodd [1808] EngR 224; (1808) 9 East 516. This appears to be amongst the first prosecutions under the Bubble Act for 87 years. Uncertainty whether joint stock companies were illegal at common law continued after the Bubble Act was repealed. Andrews N, 'Comment on Corporate Law and Historical Methodology: a Critical Perspective by Rob McQueen' (1996) 3 Canberra Law Review 15, 18.

[56] McQueen R, 'Corporate Law and Historical Methodology: A Critical Perspective' (1996) 3 Canberra Law Review 7.

[57] Pennington RR, 'The Genesis of the Floating Charge' (1960) 23 Modern Law Review 631.

[58] Peter Fitzpatrick writes: 'Jurisprudence is the theorised prejudice of lawyers. Its proponents strive to ensure the viability of law and to maintain law's authority.' Fitzpatrick P, 'The Abstracts and Brief Chronicles of Time: Supplementing Jurisprudence' in Peter Fitzpatrick (ed) Dangerous Supplements: Resistance and Renewal in Jurisprudence (London: Pluto Press, 1991).

[59] Thomas Wilhelmsson, Critical Studies in Private Law: a Treatise on Need-Rational Principles in Modern Law (Dordrecht: Kluwer, 1992) and Peter Goodrich Reading the Law (Oxford: Oxford University Press, 1986) 30.

[60] Maclean, above n 34. Judges have noted this over the years: 'Needless verbosity is the mother of difficulty' Good's case (1627) Poph 211 at 212, per cur (semble Hyde CJ, Doderidge, Jones and Whitelock JJ); 'Words are but pictures of things, and he who employs himself about the embellishment of language, seem to be in love with the picture, and to negelct the life.' Lilly, Assize, 1719 p xxix; 'Most of the disputes in the world arise with words' Morgan v Jones (1773) Lofft 160 at 176, per Lord Mansfield CJ; 'One half of the doubts in life arise from the defects of language' Gibbons v Ogden [1824] USSC 18; 22 US 1 at 232 (1824) per Johnson J; Halsbury LC 'I doubt whether any one of us has not more than once found that human languaage is but an imperfect instrument for the expression of human thought' Tubes Ltd v Perfecta Seamless Steel Tube Co Ltd (1902) 20 RPC 77 at 96. In discussing the meaning of 'contributory' under the Companies Act 1948 Roxburgh J once referred to decisions which showed that shareholders who in fact could not be called upon to make contributions because their shares were fully paid up could nevertheless be 'contributories.' After citing a passage from a judgment of Turner LJ referring to 'every person under this Act to contribute, ' Roxburgh J said 'By this I understand the Lord Justice to mean liable, not in the events which have happened, but in the events which might happen, in the same way in which a certain college porch is named 'Jumbo' because the the college would have to keep an elephant there if it had one.' Re Phoenix Oil and Transport Co Ltd [1958] Ch 560 at 564.

[61] MacKinnon CA, 'Feminism, Marxism, method and the state: towards feminist jurisprudence' (1983) 8 Signs 635, 638-9.

[62] Hasnas J, 'Back to the Future: From Critical Legal Studies Forward to Legal Realism, or How Not to Miss the Point of the Indeterminacy Argument' (1995) 45 Duke Law Journal 84, 87 quoting Belliotti RA, Justifying Law (1992) 4.

[63] Paul Carrington, the former dean of Duke University School of Law called on critical legal studies scholars to 'depart the law school' because of their 'nihilism.' Carrington PD, 'of Law and the River', (1984) 34 Journal of Legal Education 227. This led to a considerable debate: Martin, PW ''Of Law and the River' and of Nihilism and Academic Freedom' (1985) 35 Journal of Legal Education 1, Gordon, RW 'Robert W Gordon to Paul D Carrington' (1985) 35 Journal of Legal Education 1, Carrington PD, Paul D Carrington to Robert W Gordon' (1985) 35 Journal of Legal Education 9, Brest P, 'Paul Brest to Phillip E Johnson' (1985) 35 Journal of Legal Education 16, Calabresi G, 'Guido Calabresi to Paul D Carrington' (1985) 35 Journal of Legal Education 23 and Fiss OM, 'Owen M Fiss to Paul D Carrington' (1985) 35 Journal of Legal Education 24.

[64] Goodrich, above n 25, 202. At 202 note 69 he cites Derrida J, 'Force of Law: The Mystical Foundation of Authority' (1990) 11 Cardozo Law Review 919.

[65] Fischer's and Easterbrook's suggested that law was only binding at the option of a firm was also criticised. Teubner quotes, with disapproval, their statement: 'Managers do not have an ethical duty to obey regulatory laws just because those laws exist. They must determine the importance of these laws. The penalties Congress names for disobedience are a measure of how much it wants firms to sacrifice in order to adhere to the rules: the idea of optimal sanctions is based on the supposition that managers not only may, but also should violate the rules when it is profitable to do so.' Easterbrook FH and Fischel DR, 'Antitrust Suits by Targets of Tender Offers' (1982) 80 Michigan Law Review 1155, 1177. Teubner G, Bankowska A and Adler R (trans) Law as an Autopoietic System (Oxford: Blackwell, 1993) 79.

[66] Ibid 101 and notes 9-12 cites the works in which these authors have expressed these views. Teubner is critical of Wiethölder's attempt to use the principles of conflict of laws to reduce internal conflict within the separate units of law clash as he is not able to identify which ones. Ibid 108-9. Preuss argues that law should mediate not only the disputes within itself but also those between external systems in order to integrate them again into the body politic. Ibid 111. Teubner sees that recognition of autopoiesis is already at work in relational theories of contract. Ibid 115-22.

[67] Ibid 101.

[68] See note 39.

[69] McCahery and Picciotto, above n 49, 247. Teubner quotes Wiethölter: 'the dominating phenomenon of the last 10 to 15 years that the work of lawyers as socially oriented and exercised practice has remained almost untouched by all the more fundamental challenges facing our legal system, jurisprudence and legal doctrine.' Wiethölter R, 'Social Science Models in Economic Law' in Daintith T and Teubner G (ed) Contract and Organisation: Legal Analysis in Light of Economic and Social Theory (Berlin: de Gruyter, 1986) 52, 53 quoted in Teubner, Bankowska and Adler, above n 65, 7.

[69] Davies M, asking the law question (Sydney: Law Book, 1994) 50. This was Bentham's persistent theme: '[A]s well grounded a guess might be had of an astrologer for five shillings as of counsel for twice or thrice as many guineas.' He wrote of the expression the 'common law': 'In these two words you have a name pretended to be the name of a really existent object: - look for any such existing object - look for it till doomsday, no such object will be found.' Ibid.

[70] Hendrik Hartog examines laws relating to keeping pigs in the street in New York in the early nineteenth century. He suggests that a successful prosecution for pig keeping, which resulted in a fine of one dollar, could be read as a single text prohibiting pig keeping. It can also be read as a conflict between contending normative orders. Hartog H, 'Pigs and Positivism' [1985] Wisconsin Law Review 899, 931. He emphasises the significance of custom in supporting the rights of those who wished to keep pigs. He chooses not to choose between the interpretations as one reflects a valued vision of the law as a single text and the other conflicting visions of social order and the pluralism of American law. Ibid 899-900. He sees that even with a positive statement of law custom is important. He observes: 'A custom ... is not necessarily a practice confirmed by judicial doctrine or statute. Legal authority may emerge from numbers of governmental and quasi-governmental institutions and practices. Prosecutorial discretion, bureaucratic inertia, fiscal incapacity may all play parts as sources and justification for the practice, as may the realisation that the action against the custom might undermine the legitimacy or effectiveness of the political order.' Ibid 935

[71] Gray JC, The Nature and Sources of the Law (New York: Columbia University Press,1916) 80-1.

[72] Hart HLA, The Concept of Law (Oxford: Clarendon Press, 2nd ed, 1994) 119.

[73] Frederick Schauer said Hart claimed that language and the rules based on it had a settled core of meaning and a penumbra of uncertainty but that he was the victim of the Karl Llewellyn 'selection effect'. There is no incentive to dispute the indisputable so that the cases which end up in the court are skewed sample of legal events, the cases litigated will be from the penumbra. Schauer F, 'Introduction' Schauer F (ed) in Law and Language (Aldershot: Dartmouth, 1993) xi, xiii.

[74] Cross R and Harris JR (ed) Precedent in English Law (Oxford: Clarendon Press,1991) 213 Hart HLA, 'Positivism and the Separation of Law and Morals' (1958) 71 Harvard Law Review 593.

[75] Waluchow WJ, Inclusive Legal Positivism (Oxford: Clarendon Press, 1994) 5 quoting Hart HLA, Issues in Contemporary Legal Philosophy, 36.

[76] Hart HLA, The Concept of Law (Oxford: Clarendon Press, 1961) 134-5.

[77] Fuller L, 'Positivism and Fidelity to Law - A Reply to Professor Hart' (1958) 71 Harvard Law Review 630. He did this with a response to Hart's example of the application of a prohibition on vehicles in a park to a bicycle. Fuller showed that legal rules could not be divorced from purpose, context and policies. Fuller argued that if the object was a Second World War truck to be mounted as a memorial the judge could not rely on a dictionary meaning but would be forced to consider the purpose of the rule. Schauer F, Playing by the Rules - A Philosophical Examination of Rule-Based Decision Making in Law and in Life (Oxford, Clarendon Press, 1991) 212-5 has sought to reconcile Hart's core meaning with the justification for the rule.

[78] Waluchow, above n 75, 243. 'Wittgenstein's advice ... is peculiarly relevant to the anlysis of legal and political terms. Considering the definition of 'game' he said, 'Don't say there must be something common or they would be called 'games', but look and see whether there is anyhting common to all. For if you look at them you will see anything common to all but similarities, relationships, and a whole series at that.' Hart, above n 72, 234, quoting Wittgenstein, Philosophical Investigations, i, 66. But see Zapf C and Moglen E, 'Linguistic Indeterminacy and the Rule of Law: On the Perils of Misunderstanding Wittgenstein' (1996) 84 Georgetown Law Journal 485, 489, 518.

[79] 'The clear cases are those in which there is general agreement that they fall within the scope of a rule, and it is tempting to ascribe such agreement simply to the fact that there are necessarily such agreements in the shared conventions of language. But this would be an oversimplification because it does not allow for the special conventions of the legal use of words, which may differ from their common use, or for the way in which the meaning of words may be clearly controlled by reference to the purpose of a statutory enactment which may itself be either explicitly stated or generally agreed.' Waluchow, above n 75, 270 quoting Hart HLA, 'Problems of the Philosophy of Law', 271.

[80] 'It is of crucial importance that cases for decision do not arise in a vacuum but in the course of the operation of a working body of rules, an operation in which a multiplicity of diverse considerations are continuously recognized as good reasons for a decision. These include a wide variety of individual and social interests, social and political aims, and standards of morality and justice; and they may be formulated in general terms as principals, policies and standards. In some cases only one such consideration may be relevant, and it may determine a decision as unambiguously as a determinate legal rule.' Waluchow, above n 75, 270 quoting Hart HLA, 'Problems of the Philosophy of Law', 271.

[81] George RP, 'Preface' in George RP (ed) The Autonomy of Law: Essays on Legal Positivism (Oxford: Clarendon Press, 1996) vi, vi. This makes it difficult to distinguish the positivist from the realist. Jori M, 'Introduction' in Jori M (ed) Legal Positivism (Aldershot: Dartmouth, 1992) xvii-xx. Indeed Greenawalt has 'failed to identify any thesis of legal positivism that both is plausible and that marks it off distinctively from various positions that are advanced as being alternatives to it.' Greenawalt K, 'Too Thin and Too Rich:Distinguishing Features of Legal Positivism' in George, this note, 1, 19. He identifies a concern with law 'as a social fact' as the main distinguishing feature but this appears to be a feature many legal theories could claim. Ibid.

[82] Fuller LL, 'The Case of the Speluncean explorers' (1949) 62 Harvard Law Review 616. This describes a fictional case in which explorers, trapped in a cave, select, using a dice, one of themselves to die. A fictional Supreme Court considers the moral content of law in their appeal against the death penalty following their conviction for murder.

83 Fuller LL, The Law in Quest of Itself (Chicago: The Foundation Press, 1940) 60.

[84] Fuller wrote: 'in a period when major readjustments in our economic and social order have become necessary ... Since many of these necessary changes have to be brought about by legislative and administrative decree, the power of governmental fiat is being stretched to the utmost .... It would seem that the present is a time when our social structure requires to be held together by a cement firmer than that supplied by the abstract principle for respect for law as such.' Fuller LL, The Law in Quest of Itself (Chicago: The Foundation Press, 1940) 115-16. See also Fuller LL, The Morality of Law (New Haven: Yale University Press, rev ed, 1969).

[85] Fuller observed that in 'a sufficiently homogenous society certain 'values' will develop automatically and without anyone intending or directing their development. In such a society it is assumed that the legal rules developed and enforced by courts will reflect these prevailing 'values'.' Fuller LL, 'The Forms and Limits of Adjudication' (1978) 92 Harvard Law Review 353, 378. See also Frankfurter F, 'Some Reflections on the Reading of Statutes' (1947) 47 Columbia Law Review 527, 530.

[86] The most relevant parts of Dworkin's work are: Dworkin R, Taking Rights Seriously (London: Duckworth, new imp with reply to critics, 1981) 81-130, particularly 110-123. Dworkin RM, Law's Empire (Cambridge, Mass: Harvard University Press, 1986) 24-6, 120-35, 149-63, 240-50 and 400-4. An earlier statement of his views can be found in debate with Wasserstrom. Wasserstrom discusses criticisms of the deductive theory showing that many stem from a misunderstanding of logic. The judicial process is a process of justification and not discovery. This should be a two level process, ie, the decision deduced from the most desirable rule. Wasserstrom RA, The Judicial Decision: Toward a Theory of Legal Justification (Stanford: Stanford University Press, 1961) Chapters 2, 3 and 7. This is criticised by Dworkin on the ground that the assumptions underlying Wasserstom's thesis make it valueless. These are said to be that there is some unique goal or function which a legal system should serve, that judicial decision should involve calculation of the sort discussed, and the absence of legislative rules. Dworkin RA, 'Does Law Have a Function? A Comment on a Two Level Theory of Decision' (1964) Yale Law Journal 640.

[87] Davies, above n 68, 52-4. Cotterell, above n 23. Gray had also anticipated this arguing that ethical principles are sought out and used by judges. 'When a case comes before a court for decision there may be no statute, no judicial precedent, no professional opinion, no custom, bearing on the question involved, and yet the court must decide the case somehow.' He goes on to write: 'a source of the law, not the only source, but a source and a main source, is found in the principles of ethics. These principles, therefore, are legitimately a part of Jurisprudence.' Gray, above n 71, 292.

[88] This appears to follow Frankfurter and Hart: 'As governmental problems become more and not less complicated, as the dislocating impact of technological advances become more powerful and less imperceptible, as the forces of economic interdependence demand more and more determination and ingenuity for the maintenance of a simpler but perhaps more socially satisfying society, the deep wisdom of the Court's self-restraint against undue or premature intervention, in what are ultimately political controversies, becomes the deepest wisdom for our times.' Frankfurter F and Hart HM, 'The Business of the Supreme Court at October Term, 1934' (1935) 49 Harvard Law Review 68, 107.

[89] Pound R, 'Survey of the Conference Problems' (1940) 14 University of Cincinatti Law Review 324, 330. Dickinson, for example, wrote of legal principles representing basic moral beliefs. Dickinson J, 'The Law Behind Law' (1929) 29 Columbia Law Review 285, 296. Posner detects a resemblance to Cardozo's use of principle. Posner RA, Cardozo: A Study in Reputation (Chicago: Chicago University Press, 1990) 29.

[90] This conception, Dworkin writes, 'insists that, so far as is possible, the power of the state should never be exercised against individual citizens except in accordance with rules explicitly set out in a public rule book available to all. The government as well as ordinary citizens must play by these public rules until they are changed, in accordance with further rules about how they are to be changed, which are also set out in the rule book.' Dworkin R, Political Judges and the Rule of Law: Maccabean Lecture in Jurisprudence 1978 (London: British Academy and Oxford University Press, 1978) 261-2. Dworkin notes that he notes that English speaking lawyers are tricked into this, according to Pound, because it uses the same word for 'a law' and 'the law' whilst French and German maintain the distinction with 'loi' and 'droit' and 'Gesetz' and 'Recht'. Dworkin, Taking Rights Seriously , above n 86, 38 He criticises Hart for holding this belief. Ibid 292-3. Dworkin RM, 'Is Law a System of Rules?' in Dworkin RM (ed) The Philosophy of Law (Oxford: Oxford University Press, 1977) 38. Dworkin, Law's Empire, above n 86, 116-7.

[91] 'It assumes that citizens have moral rights and duties with respect to one another, and political rights against the state as a whole. It insists that these moral and political rights be recognized in positive law, so that they may be enforced upon the demand of individual citizens through courts or other judicial institutions of a familar type, so far as this is practicable. The rule of law on this conception is the ideal of rule by an accurate public conception of individual rights. It does not distinguish, as the rule-book conception does, between the rule of law and substantive justice; on the contrary it requires, as part of the ideal of law, that the rules in the rule book capture and enforce moral rights.' Dworkin, above n 90, 262.

[92] In Dickinson's model conflicting principles carried the answer within them as they 'have a significant habit of travelling in pairs of opposites.' For Dickinson the level of indeterminacy this produced meant that such principles could not be law. He wrote: 'Each is a general expression of the fact that the law will protect a certain kind of human interest; but, the conditions of human life and association being what they are, every such interest if carried beyond a certain point is bound to come into conflict with some other interest or interests of a kind which the law also protects - and will thus come into conflict with a competing principle of equal validity.' Dickinson J, 'The Law Behind Law' (1929) 29 Columbia Law Review 285, 298.

[93] If they were not the principle that people should not be punished or deprived under retrospectively made laws would be violated. Dworkin, Taking Rights Seriously, above n 86, 30. It would also mean that there is no guarantee of, or promotion of, expectations based on previous decisions. Ibid 128

[94] Rawls wrote, in 1951, that ethics involved the attempt to reasonable principles which would produce the right result. The use of these principles would mean that 'if any competent man were to apply them intelligently and consistently to the same cases under review, his judgements, made systematically nonintuititive by the explicit and conscious use of the principles, would be ... identical , case by case, with the considered judgments of ... competent judges.'Rawls J, 'Outline of a Decision Procedure for Ethics' (1951) 60 Philosophical Review 177, 178, 184.

[95] Dworkin, Taking Rights Seriously, above n 86, 293

[96] Paterson A, The Law Lords (London: Macmillan, 1982) 2, 123, 190-1, 194-195. This view is confirmed in the Australian context by Mason J in Sturgess G and Chubb P, Judging the World: Law and Politics in the World's Leading Courts (Butterworths: Sydney, 1988) 346 and Sir Ninian Stephen's comments. Ibid 3. Seidman states: 'There is a difference between 'clear' and 'trouble' cases. In the former, there is a rule at hand and the facts fall within the inner core of the categories specified by the rule; in the latter one or other of these conditions is lacking. The judge's tasks differ too. In 'clear' cases she is applying a pre-existing rule; in trouble cases she makes the rule ex post facto.' Seidman RB, 'The judicial process reconsidered in the light of role theory' (1969) 32 Modern Law Review 516. Lord Scarman states that judges have much freedom of choice in the way in which they give their decisions. This lays a great responsibility on them and makes qualifications and processes of appointment important.' Scarman LG, 'The English Judge' (1967) 30 Modern Law Review 1.

[97] He does so by likening it to a literary dispute in which the answer 'no-right-answer' is one of a number of contenders as a possible answer, to be preferred to others, to a question about a fictional character for which there is no information. No answer can be right or wrong except by agreement between the critics involved. So it is in law. Dworkin, Taking Rights Seriously , above n 86, 331-2. Unless it is conceded that even in hard cases the decision is correct this introduces a new aspect to legal theory that requires all reasonable lawyers to be satisfied the decision is right before it is accepted as law. In addition we gain through the attempt in aspiring to have adjudication using the correct principle. Ibid 338. This was a strong feature of the declaratory system. As Llewellyn observes: 'Even judges who know with their minds that varying answers would be legally permissible will be found with a strong urge to feel that one among them must be the right one.' Llewellyn KL, The Common Law Tradition: Deciding Appeals (Boston: Little, Brown, 1960) 24.

[98] Bell J, Policy Arguments in Judicial Decisions (Oxford: Clarendon Press, 1983) 'Chapter VIII The Rights Model', 204-225.

[99] Demott observed that criteria such as good faith were so loosely defined that the court had considerable discretion. She accepted the literary metaphor to the extent that the cases had to be read in a nuanced way having regard to the court's categorising the party's behaviour as 'odd', 'puzzling' or 'troublesome' which appear to be gratuitous but which prevent the decision being used to generate definite rules. She finds that Dworkin's analogy of common law, as opposed to equity, cannot explain these decisions. Novels have plots and conclusions which were missing here so hence her preference for the cautionary story. DeMott DA, 'Puzzles and parables: defining good faith in the MBO context' (1990) 25Wake Forest Law Review 15, 36.

[100] Coase RH, 'The New Institutional Economics' (1984) Journal of Institutional and Theoretical Economics 229, 230. Coase used the expression 'waiting for a theory or a fire.' He was referring to early twentieth century institutional economics.

[101] Minda, above n 15, 287-8 note 6. He refers to Easterbrook FH, ''Method, Result, and Authority: A Reply' (1985) 98 Harvard Law Review 622 and Kitsch EW, 'The Intellectual Foundations of Law and Economic'', (1983) 33 Journal of Legal Education 184. Coase claims that the ambiguity has been brought about by the second generation in law and economics turning to an 'eclectic jurisprudence' which includes postmodernism. Kitch EW, 'The Intellectual Foundations of 'Law and Economics'' (1983) 33 Journal of Legal Education 184.

[102] Holmes, above n 1. Holmes also observed that 'every lawyer ought to seek an understanding of economics.'

[103] Clark JM, Social Control and Business (Chicago: University of Chicago Press, 1926) Clark defined 'control' as 'primarily, coercion: orders backed by an irrestible power ... But there are other less obvious ways of exercising control. In a broad sense, you can control me if you can make me do what you want, no matter what motive you use.' Ibid 6. Clark acknowledged the contribution of Karl Llewellyn. Ibid xv. Robert Lee Hale had previously recognised that economic power conferred a power of coercion similar to that of the state. Duxbury, above n 39, 110-11. Hale had been inspired by Thorstein Veblen's The Theory of Business Enterprise (New York: Mentor, 1958) first published in 1904).

[104] Llewellyn KN, 'The Effect of Legal Institutions Upon Economics' (1925) 15 American Economic Review 665, 672.

[105] Ibid 678.

[106] Veblen observed: 'The lawyer is exclusively occupied with the details of predatory fraud, either in achieving or checkmating chicanery, and success in the profession is therefore accepted as marking a large endowment of that barbarian astuteness which has always commanded men's respect and fear.' Verblen T, The Theory of the Leisure Class: An Economic Study of Institutions (New York: Mentor, 1953) 156. This was taken up by Fred Rodell: 'In tribal times, there were the medicine men. In the Middle Ages, there were the priests. Today there are the lawyers. For every age, a group of bright boys, learned in their trades and jealous of their learning, who blend technical competence with plain and fancy hocus-pocus to make themselves masters of their fellow men. For every age, a pseudo-intellectual autocracy, guarding the tricks of its trade from the uninitiated, and running, after its own pattern, the civilization of the day.' Fred Rodell, Woe Unto You, Lawyers! (New York: Berkeley, 1980) 1.

[107] See the Non-Posnerian Law and Economics Symposium (1989) 12 Hamline Law Review 193.

[108] Hayek FA, Law, Legislation and Liberty, Volume 1, Rules and Order (London: Routledge & Kegan Paul, 1973) 118-19. It repeats the emphasis in the Austrian school of economics on free running and evolutionary social processes which result from 'non-reflected action'. Marginson S, The Freemarket: A Study of Hayek, Friedman and Buchanan and Their Effects on the Public Good (Sydney: Public Sector Research Centre, University of New South Wales, 1992) 23-8.

[109] Hayek, above n 108, 135. Hayek's description of the common law avoids the political and moral issues in judicial decision making. According to Hayek the judge cannot 'will' a particular result but he concedes that the experience of the judge matters. He agrees that the logic of the law is not that of the syllogism but of the situation. He quoted, with apparent approval, one of Holmes' observations which became a foundational statement of realists: 'The life of the law has not been logic, it has been experience. The felt necessities of the time, the prevalent moral and political theories, institutions of public policy, avowed or unconscious, even the prejudices which judges share with their fellow-men, have a good more to do than syllogisms in determining the rules by which men should be governed.' Ibid 106 and note 14 citing Holmes OW, Jr, The Common Law, (New York, 1963 7). There are other problems with Hayek's model of the common law. He argues that it is a system of law which promotes freedom more than legislation as it is a spontaneous order free of human will. He condemns conservatives for not welcoming the further free growth of social institutions Hayek FA, The Constitution of Liberty (Chicago, Chicago University Press, 1960) 398. But this does not explain why he does not welcome into this evolutionary development the constructive rationalism present in European law for four centuries or the expanded role of the state or democratic processes which have developed over the past 200 years. Gamble A, Hayek: The Iron Cage of Liberty (Oxford, Oxford University Press, 1996) 185, 190. Legislation, which results from successive parliaments and negotiated processes could also be seen as an undirected spontaneous order.

[110] Hoyt wrote: 'The common law is more likely to follow a formal rule after the reasons for its adoption has passed, to allow vested interests to reap a social income after their function has disappeared, to repudiate new movements as transient because they conflict with fundamental principles, and to enforce a standard of morality from which this age has departed.' Hoyt H, 'The Economic Function of the Common Law' (1918) 26 Journal of Political Economy 167, 179.

[111] Julius Stone, The Province and Function of Law: Law as Logic, Justice and Social Control (Sydney: Associated General Publications) 1946, 717 and note 55. Stone resolved this issue in his suggestion that the judge's 'ought' appears to the reader as the judge's 'is'.

[112] JK Galbraith wrote of the emerging market economics, which he believed divorced economics from judgment, that 'it achieved considerably more academic respectability from an energetic group of evangelists who gathered, along with von Hayek, at the University of Chicago with academic outriders in other centers.' Galbraith JK, The Affluent Society (Boston, Houghton Mifflin, 3rd ed, 1976) xi, 122. In fact a neo-classical approach to economics already prevailed at Chicago before Hayek went there. Duxbury, above n 39, 330-9.

[113] Posner wrote:'the economic theory of law seems, to this biased observer anyway, the best positive theory of law extant. It is true that anthropologists, sociologists, psychologists, political scientists, and other social scientists besides economists also do positive analysis of the legal system. But their work is thus far insufficiently rich in theoretical and empirical content to afford serious competition to economists.' Posner R, 'The Economic Approach to Law' (1975) 53 Texas Law Review 757, 774.

[114] Stigler GS, The Economist as Preacher and Other Essays (Chicago: Chicago University Press, 1982) 22.

115 Demetsz H, 'Social Responsibility in the Enterprise Economy' (1978) 10 Southewestern University Law Review 1, 1.

[116] Coleman JL and Kraus J, 'Rethinking the Theory of Legal Rights' (1986) 95 Yale Law Journal 1335. Easterbrook FH, 'Method, Result and Authority: A Reply' (1985) 98 Harvard Law Review 622 argued that 'scacity', 'choice', 'self-interested conduct' are the 'facts of life' which judges must sometimes respond to in legal decision making. McEwin RI, 'Liberty, Law and Economics' in Ratnapala S and Moens GA (ed) Jurisprudence of Liberty (Butterworths: Sydney, 1996) 165, 167.

[117] Gordon RW, 'Introduction: Holmes' Shadow' in RW Gordon ed, The Legacy of Oliver Wendell Holmes Jr (Edinburgh: Edinburgh University Press, 1992) 1, 6.

[118] The process of legislation is the reverse as it is a deal between congress and interest groups and the legislation is a product sold into a market full of free riders. Posner argues that if judges do not decide according to economic efficiently criteria parties will, by contract, avoid the courts use contract as a form of private legislation. Benson, above n 44, 644-61. Benson basically argues that custom always preceded law in the adjudication of commercial disputes, partly because business frequently transcends national boundaries and partly because business practice evolves too rapidly for legislation to keep up with. He also discusses commercial law as a stimulus to, and product of rent-seeking, by the legal profession and business's attempt to displace onto the public costs they would otherwise have to assume themselves.

[119] Dworkin R, 'Why Efficiency? A Response to Professors Calabresi and Posner (1980) 8 Hofstra Law Review 563, 563-4. Samuels WJ and Mercuro N, 'Posnerian law and Economics on the Bench' (1984) 4 International Review of Law and Economics 107, 123. Kennedy D, 'Form and Substance in Private Law Adjudication' (1976) 89 Harvard Law Review 1685, 1763.

[120] Cooter RD, 'Law and the Imperialism of Economics: An Introduction to the Economic Analysis of Law and a Review of the Major Books' (1982) 29 UCLA Law Review 1260, 1263.

[121] Summers RS, 'The Future of Economics in Legal Education: Limits and Constraints' (1983) 33 Journal of Legal Education 337, 339.

[122] Kornhauser LA, 'An Economic Perspective on Stare Decisis' (1989) 65 Chicago-Kent Law Review 63, 63.

[123] Buchanan JM, 'Good Economics - Bad Law' (1974) 60 Virginia Law Review 483, 490-2.

[124] Wealth maximisation occurs when goods and services are placed in the hands of those who value them the most. This is determined by a willingness to pay more money or its equivalent to have the goods. A distribution of goods is Pareto efficient if no change can be made that leaves no one worse off and at least one person better off, Dworkin, A Matter of Principle, above n 86, 237-8, 240.

[125] Coase R, 'Coase on Posner on Coase' (1993) 149 Journal of Institutional and Theoretical Economics 96. Posner has replied to Coase's criticism suggesting that Coase's best work was done some time ago. Posner RA, Overcoming Law (Cambridge, Mass: Harvard University Press, 1995) 406-43. Posner's concepts were criticised by another Noble laureate in economics, for his work on public choice theory, James Buchanan from the Virginia school of economics. Buchanan, above n 123, 483. This is a review of the first edition of Posner's Economic Analysis of Law. Campbell D, 'Ayres versus Coase: An Attempt to Recover the Issue of Equality in Law and Economics' (1994) 21 Law and Society 434. Campbell notes that the price theories of Coase dominate law and economics. This neo-classical theory neglects the work of institutionalist economists. The theorists who followed Veblen, amongst whom is Ayres, have given greater emphasis to equality and egalitarian income distribution.

[126] Posner argues that a judge will follow a precedent as it projects a judge's influence more effectively. If a judge does not follow precedent other judges of judges will not be criticised for failing to follow the original judge's decision. So the chance of the present judge's decisions not being followed are increased. This diminishes the judge's influence.Because of judicial independence, which does not reward or punish judges in market terms for their decisions, there is no incentive for judges to do so apart from criticism which, he acknowledges, is a weak force but one to which judges are particularly susceptible. He acknowledges that there is a free rider problem. A judge may not follow a precedent and the criticism may be less than the gains. The appellate process deals with this and the final court of appeal, because of the desire to project influence, will adhere to precedent. Posner RA, Economic Analysis of Law (Boston: Little, Brown & Co, 4th ed, 1992), 'Chapter 20, The Process of Legal Rule Making' 539-48.

[127] Ibid 368.

[128] Contract law economises on transaction costs by supplying such standard contract terms that parties would otherwise have to adopt by express agreement. Posner concedes that even in a context where it is possible to contract, like workers' safety,it is not likely to happen. Ibid 369-72.

[129] This can be traced back to Williamson who had dissolved the company into a nexus of exchange relations amongst the holders of various corporate resources. The general outline of this dissolution is in: Williamson O, Markets and Hierachies: Analysis and Anti-Trust Implications (New York: Free Press) 1975 and The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting (New York: Free Press, 1985).

[130] 'In direct opposition to the ... doctrine of strict property rights is the view, apparently held by the great corporation lawyers and by certain students of the field, that corporate development has created a new set of relationships, giving to the groups in control powers which are absolute and not limited by any implied obligation with respect to their use. This logic leads to drastic conclusions. For instance, if, by reason of these new relationships, the men in control of a corporation can operate it in their own interests, and can divert a portion of the asset fund of income to their uses, such is their privilege. Under this view, since the new powers have been acquired on a quasi contract basis, the security holders have agreed in advance to any losses which they may suffer by reason of such use.' Berle AA and Means GC, The Modern Corporation and Private Property (New York: Macmillan, 1932) 354.

[131] One of the consequences of this corrosive treatment is that the 'corporate and collective elements of the organisation are ... systematically underexposed, if not totally eclipsed.' It privileges the two concepts which underlie contract, exchange and competition, at the expense of a third, cooperation, which also appears to be a significant issue in the corporate structure and governance. Teubner, Bankowska and Adler, above n 65, 129. It also suggests that the basic unit in the company is the market transaction when it is the decision. The corporate decision points to expectations within the company and the interest of the company whereas the market points to price and individual self-interest. Ibid 130.

[132] Teubner, Bankowska and Adler, above n 65, 131.

[133] Posner prefers an analogy from TS Eliot of how a new work of sculpture in a sculpture park changes the way that we see other sculptures. We read one writer in a different way after another writer has written. Posner, above n 22, 260.

[134] Ibid 384-7, 464-7. Posner, above n 126, 444-67.

[135] Coase RH, 'The Nature of the Firm' in Coase RH, The Firm, the Market and the Law (Chicago: University of Chicago Press, 1988) 33, 43. Coase wrote: 'The main reason why it is profitable to establish a firm would seem to be there is a cost in using the price mechanism. The most obvious cost of 'organizing' production through the price mechanism is that of discovering what the relevant prices are. This cost may be reduced but it will not be eliminated by the emergence of specialists who will sell this information. The costs of negotiating and concluding a separate contract for each exchange transaction on a market must also be taken into account.' Ibid 38-9. The influence of this article is discussed in: Coase RH, 'The Nature of the Firm: Influence' (1988) 4 Journal of law, Economics, and Organisation 33 and Bratton WW, 'The New Economic Theory of the Firm: Critical Perspectives from History' (1989) 41 Stanford Law Review 1471, 1477-8.

[136] Coase RH, 'The Problem of Social Cost' in Coase RH, The Firm, the Market and the Law (Chicago: University of Chicago Press, 1988) 95. For an argument that this principle should be used as a legal principle see White B, 'Coase and the Courts: Economics for the Common Man' (1987) 72 Iowa Law Review 577.

[137] Manne's assumption is that this market disciplined managers to be efficient. Manne HG, 'Mergers and the Market for Corporate Control' (1965) 73 Journal of Political Economy 110, at 113. Navin and Sears show how a market developed in public company shares with little information about the companies being disclosed. Navin TR and Sears MV, 'The Rise of a Market for Industrial Securities, 1887-1902' (1955) 29 Business History Review 105.

[138] R Coase, 'The Problem of Social Cost' (1960) 3 Journal of Law and Economics 1, at 97-104. J Coffee, 'Regulating the Market for Corporate Control: A Critical Assessment of the Tender Offer's Role in Corporate Governance' (1984) 84 Columbia Law Review 1145, at 1163-6. The Chancery Court of Delaware showed one reaction outside the academic community when it observed: 'But just as the Constitution does not enshrine Mr Herbert Spencer's social statics, neither does the common law of directors' duties elevate the theory of a single, efficient capital market to the dignity of a sacred text.' Paramount Communications, Inc v Time, Inc 1989 Fed Sec L Rep (CCH) ¶ 94, 514 at 93,277 (Del Ch July 14, 1989).

[139] Coffee, above n 138, 1163-1166.

[140] Easterbrook F and Fischel DR, 'The Proper Role of a Target's Management in Responding to a Tender Offer' (1981) 94 Harvard Law Review 1161, at 1174. Fischel DR, 'The Corporate Governance Movement' (1982) 35 Vanderbilt Law Review 1259, at 1264.

[141] JR Brown, 'In Defence of Management Buyouts' (1990) 65 Tulane Law Review 57, at 60.

[142] Smith wrote: 'The directors of such [joint-stock] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own ... Negligence and profusion, therefore, mus always prevail, more or less, in the management of the affairs of such a company.' A Smith, An Inquiry Into The Nature And Causes Of The Wealth Of Nations, Printed for A Strahan & T Cadell, London, 6th ed, 1791, Book II, p 233. Parkinson points out that Marx, Alfred Marshall, and Keynes voiced similar views. Parkinson, above n 48, 46.

[143] Alchian A and Demsetz H, 'Production, Information Costs, and Economic Organisation' (1972) 62 American Economic Review 777. Dallas LL, 'Two Models of Corporate Governance: Beyond Berle and Means' (1988) 22 University of Michigan Journal of Law Reform 19, at 53-68. Fama EF and Jensen MC, 'Separation of Ownership and Control' (1983) 26 Journal of Law and Economics 301, 302-3.

[144] Williamson emphasises the uncertainty of the long term relations in the company which cannot be contracted about in advance. Williamson, The Economic Institutions of Capitalism, above n 129, 52-61.

[145] Ibid, at 61, 65-67, 83-84. Young JD, 'Federal Income Tax Law: Who Really Bought RJR Nabisco?' (1991) 25 Wake Forest Law Review 141, at 155-6. Young discusses the effect of this disagreement in the context of taxation policy.

[146] Brown, above n 141, 65-7, 83-4.

[147] Easterbrook and Fischel, above n 140, 1164, 1177-80. Fischel, above n 140, 1264.

[148] F Easterbrook and D Fischel, ''Auctions and Sunk Costs in Tender Offers' (1982) 35 Standford Law Review 1, 12.

[149] Brown, above n 141, 92-93, notes 103 and 104. Brown refers to the writers who divide on this issue. Coffee, supra, at 1156.

[150] Brown, above n 141, 95.

[151] LA Bebchuk, 'The Case for Facilitating Competing Tender Offers' (1982) 95 Harvard Law Review 1028, at 1033. G Andre, 'Tender Offers for Corporate Control: A Critical Analysis and Proposals for Reform' (1987) 12 Delaware Journal of Corporate Law 865, 874-75.

[152] L Johnson, 'The Eventual Clash Between Judicial and Legislative Notions of the Target Management Conduct' (1988) 14 Journal of Corporate Law 35, 87-8. C Goforth, 'Proxy Reform as a Means of Increasing Shareholder Participation in Corporate Governance: Too Little, But Not Too Late' (1994) 43 American University Law Review 379, at 419-20. Coffee, supra, n 56, at 1166, 1212.

[153] Johnson, above n 152, 87-8.

[154] 'Why Too Many Mergers Miss the Mark' Economist 4 January 1997, 59-60. J Kay, 'Corporate Strategy and Corporate Accountability', in Capital Markets and Corporate Governance, eds D Dimsdale and M Prevezer, Clarendon Press, Oxford, 1994, 50, p 50-1.

[155] Barnett RE, 'Introduction: A New Era of Law and Economics' (1989) 65 Chicago-Kent Law Review 3. See also 'Symposium: The Future of Law and Economics' (1992) 20 Hofstra Law Review 757-1137 and 'Symposium: Post-Chicago Law and Economics' (1989) 65 Chicago-Kent Law Review 3-191.

[156] Posner, above n 126, 426-43. Institutional economics has challenged the theses of neoclassical economics of rationality, optimality, and inexoreable progress to greater progress and efficiency through competition. Jones SRH, 'Review: Economic Revolution: An Enquiry into the Foundations of New Institutional Economics (London: Routledge, 1995)' (1996) 38 Business History 133, 133. New institutional economics is now providing alternative explanations about the nature of the firm. Lee CH, 'Review: Richard N Langlois and Paul L Robertson, Firms, Markets and Economic Change: A Dynamic Theory of Business Institutions (London: Routedge, 1995) (1996) 38 Business History 127-8.Coleman JL, 'Afterword: The Rational Choice Approach to Legal Rules' (1989) 65 Chicago-Kent Law Review 177, 188. Transaction costs have been described by Coleman as: 'First, identify the standard or typical context within which the problem is embedded. Second, identify the factors in the environment that contribute to uncertainty and those factors which constitute the pool of resources upon which parties in those circumstances might typically draw. Third, see whether the central problem which the legal rules addresses (given the context) is one of coordination, division or defection uncertainty.' Ibid 189. Others have turned from law and economics to look at other ways of explaining law-making and law reform by institutions. Romano R, 'Metapolitics and Corporate Law Reform' (1984) 36 Standford Law Review 923. Others have sought to use it to defend different, non-market values. Rose-Ackerman S, 'Progressive Law and Economics - and the New Administrative Law' (1988) 98 Yale Law Journal 341.

[157] Ulen, 'Law and Economics: Settled Issues and Open Questions' in Mercuro N (ed) Law and Economics (Dordrecht: Kluwer Academic, 1989) 224-5.

[158] Taylor C, The Malaise of Modernity (Concord: Anansi, 1991) 4-8.

[159] Fuller LL, 'American Legal Realism' (1934) 82 University of Pennsylvania Law Review 429, 443

[160] Posner, above n 22, 26-7. Dewey asserted: 'that law was best seen as an empirical social science.' Schlegel, above n 22, 8.

[161] Olivercrona K, Law as Fact (London: Stevens & Sons, 1971) 168-85. Rorty R, Objectivity, Relativism, and Truth: Philosophical Papers Volume 1 (Cambridge: Cambridge University Press, 1991) 2-12.

[162] See above n 23.

[163] See above n 24.

[164] [1916] USSC 71; 244 US 205, 222. Holmes J dissenting.

[165] [1916] USSC 71; 244 US 205, 221. Holmes J dissenting.

[166] [1916] USSC 71; 244 US 205, 221. Holmes J dissenting. Holmes, above n 11, 583.

[167] Cardozo, above n 18, 21.

[168] Twining W, Karl Llewellyn and the Realist Movement (London: Weidenfeld and Nicolson 1973) 382. Llewellyn also described realism as: 'realism is a mass of trends in legal thinking ... recognition of law as a means; recognition of change in society that may call for a change in law ... a distrust of the received set of rules and concepts as adequate indications of what is happening in courts. ... Uncertainty in the action of [appellate courts] is one main problem: to find the why of it; to find means to produce it, where it needs reduction; to find where it needs reduction, where expansion ... of the life which lies before and behind 'law''. Llewellyn KL, Jurisprudence: Realism in Theory and Practice (Boston: Little, Brown, 1962) 68-9. This was not just part of an external description of the law. Llewellyn argued that judges should also look beyond legal language and interpretation to behavioural matters 'the area of contact, of interaction, between official regulatory behaviour and the behaviour of those affecting or affected by official regulatory behaviour.' Llewellyn K, 'A Realistic Jurisprudence - The Next Step' (1930) 30 Columbia Law Review 431, 464. Oliphant and Hewitt, for example, criticised legal scholarship as tending 'more and more to neglect how courts decide cases and more and more to consider what they say about why they decide as they do, which, after all, is stating the same thing in the same way.' Oliphant H and Hewitt A, 'Introduction', in Jaques Rueff, From the Physical to the Social Sciences: Introduction to a Study of Economic and Ethical Theory (Baltimore: Johns Hopkins Press, 1929) xxvi-xxviii.

[169] Pound R, 'Review of WW Cook, Cases and Other Authorities on Equity' (1923) 37 Harvard Law Review 396, 397. Pound R, 'The Call for Realist Jurisprudence' (1931) 44 Harvard Law Review 697, 706-7. Hull NEH, 'Some Realism about the Llewellyn-Pound Exchange over Realism: The Newly Uncovered Private Correspondence, 1927-1931' [1987] Wisconsin Law Review 921.

[170] Cotterell, above n 23, 188. See Llewellyn, above n 96, 237-239.

[171] Llewellyn, above n 168, 68 and note 69.

[172] Teubner, Bankowska and Adler, above n 65, 127.

[173] Berle and Means, above n 130, 339.

[174] Chamberlin E, The Theory of Monopolistic Competition (Cambridge: Harvard University Press, 1933) 71-4.

[175] Duxbury, above n 16, 137.

[176] Hart, above n 14, 983. Frank and Cardozo who were also 'fact' sceptics. The focus on rules by superior courts blinded observers to their concentration on facts. The finding of facts was unscientific and unpredictable even before an appeal court got to them. Cotterell, above n 23, 188

[177] See above n 15.

[178] At one extreme is the nihilism of Frank that was seen again in critical studies. His best known work, Law and the Modern Mind, was produced as he undertook extensive psychoanalysis as he worked as a Wall Street corporate lawyer. He was to become a member of the Securities and Exchange Commission and its chair in 1939. Duxbury, above n 15, 176. Frank claimed that judges began with vaguely formed conclusions as a result of their personal experiences in the hearing which they then found precedents to support. Frank wrote that: 'Once trapped by the belief that the announced rules are the paramount thing in law, and that uniformity and certainty are of major importance and are to be procured by uniformity and certainty in the phrasing of rules, a judge is likely to be affected ... by consideration of the possible, yet scarcely imaginable, bad effect of a just opinion in the instant case ... He then refuses to do justice in the case on trial because he fears that 'hard cases make bad laws.' And thus arises what may aptly be called 'injustice according to law'. Such justice is particularly tragic because it is based on a hope of doomed futility, a hope of controlling the future ... For it is the nature of the future that it never arrrives ... Indeed, alleged interest in the future may be a disguise for too much devotion to the past, and a means of avoiding the necessity for facing unpleasant risks in the present.' Frank J, Law and the Modern Mind (London: Stevens & Sons, 1949) 154. Llewellyn in reviewing Frank's book observed: 'In its attack on the illusion of complete certainty it under-emphasizes what certainty there is.; in its perception of the importance of particulars it well-nigh denies the importance of generals. But what of that? Are pathfinders to have no prerogative of exaggeration?' Llewellyn, above n 168, 101. Frank, had in particular attacked Pound, who had argued that 'property' and 'commercial' should be subject to fixed rules but that 'human conduct' and 'conduct of enterprises' should be subject to discretion. Ibid 103. Frank was not alone. Green said that a judicial opinion is a justification in words of a judgment already passed. Green L, 'The duty problem in negligence cases' (1928) 28Columbia Law Review 1014 at 1019-22. Frank defined this as 'fact scepticism' which he distinguished from 'rule scepticism'. Fact sceptics focussed on trial courts to show how '[n]o matter how precise or definite may be the formal legal rules ... no matter what the discoverable uniformities behind these formal rules ... it is impossible, and will always be impossible, because of the elusiveness of the facts on which decisions turn, to predict future decisions in most, if (not all) law suits ... .' Frank J, quoted by Duxbury, above n 15, 178.

[179] Cardozo BN, 'The Nature of the Judicial Process' in Hall, ME (ed) The Selected Writings of Benjamin Nathan Cardozo: The Choice of Tycho Brahe (New York: Matthew Bender, 1949) 'Lecture III The Method of Sociology' 148 - 9. Levy BH, Cardozo and the Frontiers of Legal Thinking (New York: 1938). Frank embraced the 'hunch' theory espoused by Dewey. See also Hutcheson JC, 'The Judgment Intuitive: The Function of the 'Hunch' in Judicial Decision' (1929) 14 Cornell Law Quarterly 274. Clarke and Trubeck used Cardozo to argue that the judicial method is not exclusively deductive or inductive in a criticism of Llewellyn's Common Law Tradition.. The judge reaches a conclusion and then justifies it. Llewellyn saw an objective factor in guiding judges so that they are not free to do as they wish. Their criticism is that, in underplaying the subjective element and that the failure to take that element into account, will lead Llewellyn to not achieving his aim: predicability. Clarke CE and Trubeck DM, 'The Creative Role of the Judge: Restraint and Freedom in the Common Law Tradition' (1961) 71Yale Law Journal 255. This sides with Cardozo.

[180] Robinson ES, Law and Lawyers (New York: Macmillan, 1935). In chapter 8 the psychological processes behind the giving of judicial decisions are examined. Robinson claims the expressed reasons serve to persuade the judge himself and others of the correctness of his original conclusion. Although the operations of the judge are his own, yet his acceptance or rejection of them is governed by his estimate of the opinion of others.

[181] Frank criticises a decision of Cardozo J in the New York Court of Appeals in which the question whether a Pennsylvanian company could be sued in New York was answered by only reference to the question 'where is the corporation?' Frank wrote: 'Clearly the question of where a corporation is, when it incorporates in one state and has agents transacting corporate business in another state, is not a question that can be answered by empirical observation. Nor is it a question that demands for its solution any analysis of political considerations or social ideals. It is, in fact, a question identical in metaphysical status with the question which scholastic theologians are supposed to have argued at great length, 'How many angels can stand on the point of a needle?' ... Will future historians deal more charitably with such legal questions as 'Where is the corporation?' Nobody has ever seen a corporation. What right do we have to believe in corporations if we don't believe in angels? To be sure, some of us have seen corporate funds, corporate transactions etc. (just as some of us have seen angelic deeds, angelic countenances, etc) but this does not give us the right to hypostatize, to 'thingify', the corporation and assume that it travels about from State to State as mortal men do.' Frank J, 'Transcendal Nonsense and the Functional Approach' (1935) 25 Columbia Law Review 809, 810-1. Frank gives further corporate law examples at 813-4.

[182] Gerwitz notes: 'But in spite of all his attention to leeways in this book, Llewellyn's main point was not at all to trumpet law's indeterminacy but rather to emphasize how an adequate measure of predicability and certainty in the case law system is achieved nevertheless.' Gerwitz P, 'Introduction' in Llewellyn K, Anasaldi M (trans) The Case Law System in America (Chicago: University of Chicago, 1989) ix, xvii.

[183] There is 'reckonability', which is based on the judge's selection of the right rule for the case in hand by a guided 'situation sense'. This 'situation sense' is the product of the whole inherited culture and craft of the law. Judicial discretion is not exercised at large but is conditioned in a predictable way. How successful he was in arguing that the law is predictable in this way is a matter of legitimate difference of views. He argued that the legal system had a surprisingly high element of predicability given the complexity of the issues on which it adjudicated. It was false, however, to pretend that it had 100 per cent certainty but on a case-by-case basis it could be brought 'to the level of a reasonable, sometimes a very good, business risk.' Llewellyn, above n 96, 17. Llwellyn wrote:'The very reason appellate courts exist is that there is doubt, that skilled men do not agree about the outcome. To require reckonability is therefore to require the absurdly impossible. Nevertheless, let it be repeated: this amazing institution, our Law, answers in significant degree to the demand. That fact is vital. It needs knowing. It also needs use.' Ibid 6-7. 'there is no suggestion of any slot-machine or conveyer-belt complete predicability; I refer instead, let me repeat, only to a case-by-case reckonability that can be brought to the level of a reasonable, sometimes a very good, business risk.' This was a strong feature of the declaratory system. As Llewellyn observes: 'Even judges who know with their minds that varying answers would be legally permissible will be found with a strong urge to feel that one among them must be the right one.' Ibid 50.

[184] Llewellyn, above n 96, 6-7.

[185] '[E]ither interpretation of the language or the sizing up of the facts, or the choice open as among available divergent premises or tendencies in our multilayered legal scheme, or the like, will allow a fair technical case to be made either way or a third or a fourth way, if one lools at the authorities taken alone.' Llewellyn, above n 96, 21.

[186] Llewellyn, above n 96, 237-9.

[187] Llewellyn, above n 96, 21-23.

[188] These other materials include 'the accepted lines of organizing and seeing these materials: concepts, 'fields' of law with their differential importance, pervading principles, living ideals, tendencies, constellations, tone.' Llewellyn, above n 96, 20.

[189] Llewellyn, above n 96, 340.

[190] These are: 'law-conditioned officials'; 'responsibility for justice'; 'the tradition of one single right answer'; 'an opinion of the court'; 'a frozen record from below'; 'issues limited, sharpened, phrased'; 'adversary argument by counsel'; 'group decision'; 'judicial security and honesty'; 'a known bench'; 'the general period style and its promise'; and, 'professional judicial office'. Llewellyn, above n 96, 6-7.

[191] Llewellyn wrote: 'By virtue of environment and upbringing, the ethical values affecting him, the thought patterns and mental images absorbed from his surroundings, a man is conditioned, limited, and unconciously constrained to such a degree that his so-called freedom of action seems little more than mechanical. ... [I]n seeing man as a product of his times and his rather narrow social circumstances, in seeing him indeed as a fungible commodity swept along by outside factors, the sociologist's eye scans whole regions, mass-scale phenomenon lasting years and decades - the economic, religious and other forces that affect human behaviour. I do not deny that the judge, as man, can be seen in this light. ... As man he is, indeed, constrained. As a man with legal training, who wants to base his decision on existing rules of law, who wants in fact to be confined by them, and who, besides this, has so internalized the rules and institutions that he could no longer shake them off even if he wished - as lawyer, then, he is further constrained.' Llewellyn, above n 182, 11. According to Fish the primary constraints on judges comes from their socialisation in a profession which makes them members of an interpretative community who in their training have internalised ways of reading and understanding legal texts. For Fish this is the source of the restraint and not the text. Gerwitz, above n 182, ix, xviii-xix. Fish S, 'Working on the Chain Gang: Interpretation in Law and Literature' (1982) 60 Texas Law Review 551 and Is There a Text in This Class? (Cambridge, Mass: Harvard University Press, 1980) also acknowledges that the constraint of the interpretative community is not absolute and that legal interpreters are free to construct their own interpretations and discover their own values in the text. The shared values do not ground a new objectivity. His views have been challenged by Fiss who has argued that the courts must give meaning to public values - especially constitutional values - by engaging in 'a special dialogue'. Fiss insists that the dialogue is so closely restrained that judges cannot merely express 'personal beliefs.' Fiss OM, 'Objectivity and Interpretation' (1982) 34 Standford Law Review 739. Fiss OM 'The Death of the Law' (1986) 72 Cornell University Law Review 1. Feldman SL, 'Republican Revival/Interpretative Turn' [1992] Wisconsin Law Review 679, 699-700.

[192] 'Law (Certainty) and Justice are set up not merely to reflect an upshot of tensions and drives, but instead to give merged, moving, reasoned guidance. That Law (Certainty) and Justice need not be two, but can be one, and that machinery not only can be but has been devised on a largish scale to make that a normal rather than a strange phenomenon ... .' In a later note Llewellyn observes that instead of certainty 'I should today say: Reasonable Regularity.' Llewellyn, above n 168, 286 and note b.

[193] 'I would argue that traditionalism has persisted in law more strongly than elsewhere partly (and this is bad) because the law is not directly in contact with hard fact, but works at one remove from business, which itself works at one remove from things. But partly (and this has virtue) because one great value of law lies precisely in opposing and braking change; in choosing late among experiments, after they have competed long enough to afford a better guess at which of them is best; in crystallizing the experiments chosen as the new and solid basis for new experiments, which can then work from a common foundation. Law's precise office is not to change but to prevent change; or when that will not do, then to adjust with the least possible rearrangements to the new conditions. Obviously this job of conservation is overdone, much overdone, as things stand. The machinery for gradual readjustment should be consciously improved. But the question is: Why the illusion of certainty? And I should answer, because (at least in part) even adventurous spirits want some footing to adventure from. That need is practical.' Llewellyn, above n 168, 108.

[194] 'One of the virtue of a precedent system is that, where appropriate, judges are able to make small experiments with legal rules, which they can always revise to take account of new, unforeseen fact situations until they arrive at an appropriate legal rule (or even a legal 'institution').' Llewellyn, above n 182, 56-7.

[195] Glover, above n 29, 4 and note 18, quoting Weber M, Roth G and Wittich C (ed) Economy and Society (1978), 884. Llewellyn, in drafting the Uniform Commercial Code sought to give expression to this second view. It created ethical standards, such as unconscionability, which could then be used, as Lord Mansfield had done in the 18th century, by the judge to discover the 'commercial law immanent in the commercial community.' Ibid 5.

[196] In The Cheyenne Way Llewellyn radically revised his views of the process which makes law in the common law tradition. What impressed Llewellyn was the resolution of the conflict which occur between legal rules which seek to ensure justice by treating all similar cases the same and the desire to do justice by recognising the particular circumstance of each individual. Overemphasis on the first can produce certainty which defeats the object of the second. Overemphasis on the second can defeat the object the second. Llewellyn and Hoeble wrote: 'what the Cheyenne law-way shows here ... is that a significant high development of certainty and clarity of, of prospective outcome, felt even by most litigants in the heat of controversy, can be achieved on a not unelaborate scale, without the growth of such 'law' and 'legal procedure' as rigidifies upon itself, and comes so into opposition with the felt justice of a newer generation.' Twining, above n 168, see generally Chapter 8 for an account of the The Cheyenne Way, 153-169.

[197] Llewellyn wrote: 'Indeed it may be queried whether any sane public regulation of economic activity is the public interest - whatever that may be - is not largely accidental. The way of growth seems to be along whatever balance results from the pull and prodding of this and the other private interest. For private interests seem to have been the influential factors in law's major changes in the past. Their working constitutes the striking phase of law's relation to economics today. Increasingly, associations are forming which adopt their own rules of action and even settle their own disputes. Corporation, labor union, manufacturer's association, farmers coöperative - their number, size and experience increase. And the rules which by the permission of the state, and within the limits which the state prescribes, such associations lay down and apply, are prt of the body of our law. They are working rules; the working rules of technical activity; the very type of working rules which the official legal institutions are unable to construct. Their justification consists in that they are, and that they work. Within their sphere they are like law in all but the numbers they affect, and can be dealt with on that basis with propriety. I like to call them by-laws; the laws of a lesser group, of more or less voluntary constitution.' Llewellyn K, 'The Effects of Legal Institutions upon Economics' (1925) 15 American Economic Review 665, 672-3.

[198] This led to realism being seen as associated with relativism, nihilism, disdain for the rule of law, conflating right and might and unable to resist totalitarianism. Duxbury, above n 15, 193-4. Gordon, above n 39, 2216. Dworkin, with his emphasis on the moral, rejects the pragmatism of realism for this reason. Dworkin, Law's Empire, above n 186, 147-9, 154-5.

[199] Berle and Means, above n 130, 352-7.

[200] Teubner, Bankowska and Adler, above n 65, 132-3.

[201] Time called it 'the economic bible of the Rooseveldt administration'. Hovenkamp H, Enterprise and American Law, 1836-1937 (Cambridge: Harvard University Press, 1991) 360.

[202] Duxbury, above n 39, 155-8.

[203] Hovenkamp above n 201, 362. Berle and Means made an impact on other economists, including the neo-classicist Henry Simons. Simons argued for 'gigantic' corporations to be held to Spartan simplicity in their capital structures.' Simons HC, 'A Positive Program for Laissez Faire: Some Proposals for a Liberal Economic Policy' in Harry D Gideonse ed, Public Policy Pamphlet No 15 (Chicago: Chicago University Press, 1934) 12, 19, 21.

[204] Eskridge and Frickey state that legal process was constituted by three principles. Holmes argued that legislatures and not courts were the best institutions to make social policy choices. Legal policy makers were required to consider a utilitarian cost-benefit analysis when choosing one rule over another. Justice Frankfurter, who had also taught at Harvard, developed the next great legal process concept; 'institutional competence': each organ of government has a special competence or expertise. The third proposition was made by Lon Fuller: the democratic structure of the United States ensured the reasonableness of its laws. Legal process came under a cloud in the 1960s as the civil rights movement exposed laws that were enforced although they were in conflict with all three principles. Eskridge WN and Frickey PP, 'The Making of the Legal Process' (1993) 107 Harvard Law Review 2031. Gordon, above n 39, 2216.

[205] Eisenberg argues that the common law has two fundamental properties: common law rules are not completely certain and the common law is comprehensive in that there is a legal answer to every question, 'What is the law concerning this matter?' The two rules are corollaries. The law is generated, in his analysis, not from doctrinal propositions stated in texts from which courts work backwards but by institutional principles, including previous statements of doctrine and 'applicable social propositions', from which they work forward to make law. Eisenberg, above n 43, 156-7.

[206] Calabresi G, 'Grant Gilmore and the Golden Age' (1982) 92 Yale Law Journal 1, 2.

[207] Davies, above n 68, 126-7.

[208] Fraser D, 'What a Long Strange Trip It's Been: Deconstructing Law from Legal Realism to Critical Legal Studies' (1988) 5 Australian Journal of Law and Society 35.

[209] Marxism bears features of positivism and economic analysis as a result of Marx's application of nineteenth century scientific theories to economic history. Bullock A, Stallybass O and Trombley S, The Fontana Dictionary of Modern Thought (Fontana: London, rev ed, 1988), 330, 504-5.

[210] Scheurerman WE, Between the Norm and the Exception: The Franfurt School and the Rule of Law (Cambridege, Mass: MIT Press, 1994) 2. Neumann F, The Rule of Law: Political Theory and the Legal System in Modern Society (Leamington Spa: Berg, 1986) 'Chapter 14 The Legal System of the Competitive Society' 212-65, 255-6. He discusses the National Socialist abrogation of a free labour market in corporatist Germany, 296-7.

[211] Wiarda defines 'corporatism' as where: ' 1. Society is organized, in whole or part, not an individualistic basis ... but in terms of the functional, societal, or 'corporate' units (...labor or business unit, interest groups, etc) that make up the nation. 2. The state seeks to structure, limit, organize or license these groups as a way of controlling them ... 3. The state tries to incorporate these groups into the state system, converting them into what are called 'private sector governments'; while the groups themselves seek to take advantage in terms of prgrams and benefits for their members from such incorporation, and at the same time preserving some, usually contractually defined ... autonomy from the state.' Wiarda HJ, The Other Great 'Ism' (Amonk, NY: ME Sharpe, 1996) 9.

[212] Cotterell R, 'The Rule of Law in Transition: Revisiting Franz Neumann's Sociology of Legality' (1996) 5 Social and Legal Studies 451, 451-7. To some extent he anticipated the mass information market of the 1980s and 1990s in which range of product and consumer choice is reduced to minimise corporate risk in which the ideology of the free market is used to support the extension of bureaucracy and technology into all aspects of life. Ibid 458. Neumann E, 'On the Preconditions and Legal Concept of an Economic Consitution' in Kirchheimer O and Neumann F (ed) Tanner E and Tribe K (trans) Social Democracy and the Rule of Law (London: Allen & Unwin, 1987) 44-84.

[213] Neumann, above n 103, 213.

[214] Ibid 213.

[215] '[I]n spite of the lack of systemisationin English law, there must lie at the bottom of the doctrine of the binding force of precedent, the conception of the logical closeness of law. If all decisions are only to be reached on the basis of decisions already made, then the implication is that the legal system is complete, closed and logically consisten, so that any change in the system can only be made by way of legislation.' Ibid 245, 265.

[216] Whatever the accuracy of his views of German law there are difficulties in oversimplifying the stages of development of the common law. As Llewellyn observed Lord Mansfield CJ, in a formative stage of the English industrial revolution, specifically sought in the 'Grand style' to embody a concern with the good ordering of society in commmercial law which reduced the binding nature of precedent. Evans J, 'Change in the Doctrine of Precedent During the Nineteenth Century' in Goldstein L (ed) Precedent in English Law (New York: Clarendon Press, 1987) 38.

[217] Schlegel wrote: 'I hazard a guess that the reference to the Frankfurt School of Criticial Marxism in the title of the organization was probably lost on many, if not most, of the participants at the first meeting' Schlegel JH, 'Notes Towards an Intimate, Opinionated, and Affectionate History on the Conference on Legal Studies' (1984) 36 Stanford Law Review 391, 403. Kennedy D, 'Critical Theory, Structuralism and Contemporary Legal Scholarship' (1985) 21 New England Law Review 209. Bickenbach JE, 'CLS and CLS-ers' (1984) 2 Queen's Law Journal 263, 266-8.

[218] Cornwall D, 'Towards a Modern/Postmodern Reconstruction of Ethics' (1985) 133 University of Pennsylvania Law Review 291. See the symposium, 'Deconstruction and the Possibility of Justice' (1990) 11 Cardozo Law Review 919.

[219] 'Symposium on the Renaissance of Pragmatism in American Legal Thought' (1990) 63 Southern California Law Review 1569. Levinson S, 'Strolling Down the Path of the Law (and Toward Critical Legal Studies?): The Jurisprudence of Richard Posner' (1991) 91 Columbia Law Review 1221. Kellogg FR, 'Legal Scholarship in the Temple of Doom: Pragmatism's Response to Critical Legal Studies' (1990) 65 Tulane Law Review 15.

[220] Kennedy D, 'Form and Substance in Private Law Adjudication' (1976) 89 Harvard Law Review 1685. Kennedy's views are criticised in Kellman M, A Guide to Critical Legal Studies (Cambridge, Mass: Harvard University Press, 1987). He subsequently suggested, following Hegal, that indeterminacy is embedded in human consciouness. The very 'goal of individual freedom is at the same time dependent on and incompatible with the communal coercive action that is necessary to achieve it' or 'Through our existence as members of collectives, we impose on others and have on us hierachal structures of power, welfare, and access to enlightenment that are illegitimate.' Kennedy D, 'The Structure of Blackstone's Commentaries' (1979) 28 Buffalo Law Review 205, 211-12. Kennedy later retreated from this position. Kennedy D, 'Gabel P and Kennedy D, 'Roll Over Beethoven' (1984) 36 Standford Law Review 1, 15.

[221] McCahery J and Picciotto, above n 49, 246-7 referring to: Unger R, Politics: False Necessity: Anti-necessitarian Social Theory in the Service of Radical Democracy, Vol 1 (Cambridge: Cambridge University Press, 1987)

[222] Unger RM, Knowledge and Politics (New York: Free Press, 1975) 262.

[223] Unger RM, Law in Modern Society: Towards of Social Theory (New York: Free Press, 1976) 239.

[224] Unger continues: 'The only solution would be the one that every such compromise is meant to avoid: the remaking of the institutional arrangements that define the market economy. The doctrinal manifestation of this problem is the vagueness of the concept of economic duress. The cost of preventing the revised duress doctrine from running wild and correcting almost everything is to draw unstable, unjustified and unjustifiable lines between the contracts that are voidable and those that are not. In the event, the law draws these lines by a strategy studied indefinition though it might just as well have done so - as it so often does elsewhere - through precise but makeshift distinctions.' Unger RM, The Critical Legal Studies Movement (Cambridge, Mass: Harvard University Press, 1986) 71.

[225] 'One of the most remarkable features of classical contract theory is its oscillation between an ideal of strict altruism in a confined range of situations and a tolerance for unrestrained self-interest in the great majority of contracts. Thus, in fiduciary relations one party may be required to confer upon the other party's interests a weight greater than upon his own (or, in any event, at least equal to his own). In the ordinary commercial contract, however, the other party's interests can be treated as of no account as long as the rightholder remains within his zone of discretionary action.' Ibid 83.

[226] 'The current law of fiduciary relations consists largely of a list of special circumstances, often defined by signs which have only an oblique connection with the facts that engender trust or self-restraint. Consider, for example, the joint venture, an agreement that imposes fiduciary duties upon the coadventurers. It may be defined simply as an informal partnership of limited scope and duration that provides for a sharing of gains and losses by all the venturers. A contractual arrangement, however, may involve a close, difficult, long-term collaboration that calls for the exercise of prudent discretion without being directed to an uncertain profit. Such an undertaking may well be viewed by its participants as one demanding from each of them the most scrupulous regard to mutual loyalty. Conversely, a contract that looks to an undefined reward rather than to an exchange of predetermined performances may require, and be understood to require, only a minimum of actual cooperation.' Ibid 84.

[227] Unger stated: 'legal theories of substantial justice remain isolated in a politically inhospitable atmosphere so that, though suffieciently vital to help legitimate the social order, they may never be enough to transform it.' Unger, above n 223, 213.

[228] Branson DM, 'Indeterminacy: The Final Ingredient In An Interest Group Analysis of Corporate Law' (1990) 43 Vanderbilt Law Review 85. Branson identifies two tools of indeterminacy in the hands of Delaware courts dealing with corporate litigation: the Delaware equal dignity rule and its converse, or antipode, the Schnell doctrine. In spite of intuition that the Delaware courts would favour management in corporate disputes he finds that there are a surprising number of pro-shareholder decisions.

[229] Unger , above n 224, 89. Kennedy makes the same point that these struggles produce a conflicting body of laws derived from conflicting ethical norms. Kennedy D, 'Form and substance in private law ajudication' (1976) 89 Harvard Law Review 1685.

[230] As Zizek observes Marx's: 'great achievement was to demonstrate how all phenomena which appear to bourgeois consciousness as simple deviations, contingent deformations and degenerations of the 'normal' functioning of society ... , and as such abolishable throught the amelioration of the system, are necessary products of the system itself - the points at which the 'truth', the immanent antagonistic character of the system, erupts.' Zizek S, The Sublime Object of Ideology (New York: Verso, 1989) 128.

[231] The radical position rejects the rights theorists' beliefs that right provide a rational basis for making normative judgments. In particular the law does not help in predicting the results in hard cases which is where certainty is particularly required. They claim that this generate unreal expectations and the criteria used for rights fail to support progressive judgments because of their indeterminacy, which cannot be made determinant by theory or social context, Tushnet M, 'An Essay on Rights' (1984) 62 Texas Law Review 1363, 1380. There has been a view that rights can be reconstructed to be more responsive to the needs of the disadvantaged. Williams, 'Alchemical Notes: Reconstructed Ideals from Deconstructed Rights' (1987) 22 Harvard Civil Rights-Civil Liberties Law Review 401. Most draw on Marx's analysis that it reinforces an alienated and destructive human consciousness, Gabel P, 'The Phenomenology of Rights - Consciousness and the Pact of the Withdrawn Selves' (1984) 62 Texas Law Review 1563.

[232] Altman, Andrew, Critical Legal Studies: a Liberal Critique, Princeton, Princeton University Press, 1990. This reflects a similar division within Realism. Mark Tusnet, 'Critical Legal Studies: an Introduction to its Origins and Underpinnings' (1986) 36 Journal of Legal Education, 505 at 505.

[233] Branson, above n 228, 85. Branson identifies two tools of indeterminacy in the hands of Delaware courts dealing with corporate litigation: the Delaware equal dignity rule and its converse, or antipode, the Schnell doctrine. In spite of intuition that the Delaware courts would favour management in corporate disputes he finds that there are a surprising number of pro-shareholder decisions.

[234] See for example Hadden's analysis of collective investments and various models of capitalism in Hadden T, Company Law and Capitalism (London: Weidenfield and Nicholson, 1972) 375-400. Also see Campbell D, 'Why Regulate the Modern Corporation? The Failure of 'Market Failure'' in McCahery J, Piccciotto S and Scott C (ed) Corporate Control and Accountability: Changing Structures and the Dynamics of Regulation (Oxford: Clarendon Press, 1993) 103 and Wheeler S, 'Capital Fractionalized: The Role of Insolvency Practitioners in Asset Distribution' in Cain M and Harrington CB Lawyers in a Postmodern World: Translation and Transgression (Buckingham: Open University Press, 1994) 85. Gordon suggests that English lawyers have been generally unable to accept the CLS approach to indeterminacy because of the homogenous nature of the English legal profession. But the reaction seems to be more to the self-conscious way in which the CLS have critiqued the law, their law schools and themselves as an identifiable movement. Gordon, above n 39, 2238-9.

[235] Wilhelmsson distinguished the following levels and types: '(1) following Eriksson, take a starting point in the vertical conflict between intralegal goal formulations and concrete legal norms, if such goal formulations which are incorporated into the law are taken literally they often prove to go much further than the legal measures through which the goals are intended to be realised; (2) different branches of the law can be characterised by partially differing social values, such contradictions exist not only between traditionally counterposed fields such as private law and public law but within private law corresponding conflicts have arisen, todays private law 'embodies a multiplicity of special private laws, long without conceptual, dogmatic unity; (3) conflict can be located to the relationship between legal elements within the same branch of law, within the law of contract, for example there may occur separate cases, separate statutes that express mutually conflicting values.' Wilhelmsson, above n 59, 35. Unger also identified the conflicts between different levels of abstraction, principles, rules etc. Unger, above n 224, 89-90.

[236] Teubner describes the contradictions which have been uncovered in legal doctrine but asks: 'But how radical a critique of law is this? It appears to me that the rediscovery of indeterminacy, the ideological demystification of legal doctrine, all the 'debunking' and 'trashing', only gets to the superstructural phenomena of legal self-descriptions but never to the heart of the fundamental legal paradox.' Teubner, Bankowska and Adler, above n 65, 6.

[237] Ibid 1-12.

[238] Ewald writes of this thesis: 'Its validity does not depend on its being a truer theory than others (from its point of view true and false are not good criteria for distinguishing one theory from another), but merely more profitable at a particular point in time. The doctrine of autopoiesis can take its validity only from its performance in our current legal position. It has no value in itself. It is in relation to the self-regulation of contemporary legal practice that it should be evaluated.' Ewald F, 'The Law of Law' in in Teubner G (ed) Autopoietic Law: A New Approach to Law and Society (Berlin: Walter de Gruyter, 1988) 36, 43.

[239] Ost F 'Between Order and Disorder: The Game of Law' in Teubner, above n 238, 70, 77-9.

[240] That is phenomenona of communications and control within organisms with a disposition to maintain critical variables within particular limits acceptable to their own structures, in the face of unexpected disturbance. Bullock, Stallybass and Trombley, above n 203, 197, 391-2. In particular autopoiesis was a term invented by the biologist Humberto Maturana for a specific form of homeostasis in which the system that is held constant is the system's own organisation. Ibid 63. There are competing paradigms of what autopoiesis is. Ost, above n 238, 70, 71-4. King M, 'The 'Truth' About Autopoiesis' (1993) 20 Journal of Law and Society 218, 218. Teubner has written: 'Legal autopoiesis and postmodern jurisprudence have several things in common: the linguistic turn away from positivist sociology of law, the dissolution of social and legal realitities into discursivity, the image of fragmentation and closure of multiple discourses, the nonfoundational character of legal reasoning, the decentering of the legal subject, the eclectic exploitation of diverse traditions in legal thought, the preference for difference, différance and différends over unity, and most important, the foundation of law on paradoxes, antimonies, and tautologies.' Teubner G, 'The Two Faces of Janus: Rethinking Legal Pluralism' (1992) 13 Cardozo law Review 1445, 1445.

[241] Lempert R, 'The Autonomy of Law: Two Visions Compared' in Teubner, above n 238, 155-7. Kennealy accepted that it was put forward by Luhmann and Teubner in Florence in 1987 as a theory and not a metaphor. Kennealy P, 'Talking About Autopoiesis - Order from Noise' in Teubner, above n 238, 351-2.

[242] Teubner G, ''And God laughed ...', Indeterminacy, Self reference and Paradox in law', Joerges C and Trubeck DM (ed) Critical Legal Thought: An American-German Debate (Baden-Baden: Nomos, 1989) 399. 409. Wilhelmsson, above n 59, 34-5 draws on Teubner's analysis to reach similar conclusions.

[243] Teubner, Bankowska and Adler, above n 65, 56. Teubner claims that this distinguishes law from Hayek's and Posner's evolutionary processes in law as a process of the natural selection of economic efficiency which severely understates the autonomy of legal evolution which absorbs change from other social features apart from the economy. Ibid 56-7.

[244] Ibid 57.

[245] The metaphor which is used for 'interference' is 'order from noise'. Systems influence each other by pertubation, structural coupling and co-evolution. Teubner, above n 239, 1445-6. Teubner is now inclined to think that this does not sufficiently describe the openess of law to other cultural areas such as politics, science, economics and religion as the 'interdiscurvity' is more than noise or peturbation. He now uses a modified form of structural coupling. He sees that rather than peturbation the law 'productively misreads' other cultural areas as sources from which to produce legal norms. Strutural coupling is replaced with the concept of 'linkage institutions' indicating that the system of law is characterised by specialised institutions which bind it to a number of external sub-systems and organisations. Co-evolution is replaced with responsiveness as co-evolution would only lead to law having viable internal constructs of the external development. Responsiveness describes the manner in which law tacitly synchronises legal and social organisations. Teubner, above n 239, 1447-8.

[246] Teubner, Bankowska and Adler, above n 65, 65. Luhmann N, 'The Unity of the Legal System' in Teubner, above n 238, 12, 20-3. Teubner previously described this as a paradox: 'The radical closure of the system - under certain conditions - means its radical openess. This is one of the most challenging thesis of autopoietic theory. The more the legal system gains in operational closure and autonomy, the more it gains in openess toward social facts, political demands, social science theories, and human needs.' Teubner G, 'Introduction to Autopoietic Law' in Teubner, above n 238, 2.

[247] Luhmann N, 'Operational Closure and Structural Coupling: The Differentation of the Legal System' (1992) 13 Cardozo Law Review 1419, 1427. This was a concept he introduced as a result of the rising criticisms that the autonomy of systems is produced both inside and outside the system. Münch R, 'Autopoiesis By Definition' (1992) 13 Cardozo Law Review 1463, 1463.

[248] Luhmann, above n 247, 1435.

[249] Teubner, Bankowska and Adler, above n 65, 65.

[250] Ibid 74.

[251] See above n 65. See also Gould M, 'Law and Sociology: Some Consequences for the Law of Employment Discrimination Deriving from the Sociological Reconstruction of Economic Theory' (1992) 13 Cardozo Law Review 1517.

[252] Luhmann notes that from the fourteenth century on the legal system adapted to the requirements of the economic system by developing 'slowly, with many scruples' freer forms of contract, property and corporate law which in the nineteenth century was freed of political privilege. Luhmann, above n 247, 1435 and note 51.

[253] Teubner, Bankowska and Adler, above n 65, 105-6. The flexible standards used by law look to the particular system which is being regulated for content and meaning giving the factors used in that other system and are not clear cut legal questions. It is this issue that Luhmann's structural couplings between systems tries to explain as it is all to clear in codified legal systems and more so in common law jurisdictions that judges have to weigh myriads of competing and conflicting rights. Münch, above n 247, 1468-9. Luhmann, above n 247, 1419.

[254] On the other hand Luhmann's law looks empty. He has a normative closure which does not give content to the law and which could in itself contain a high level of indeterminacy. Teubner has now replaced this with the idea of institutional linkage. Teubner writes of the standards used in law like good faith and reasonableness: 'They have no fixed reference and take on a different meaning according to the context of the relevant discourse. They have no predetermined content but are the loci for socio-legal debate. These concepts are 'essential' because they they reflect the very intrinsic logic of the discourses involved. And they are 'contested' because they reflect basic discursive differences. They do not create a new unity of separate discourses involved, they only link them transcending the boundaries but respecting, even reaffirming them. In spite of their identical nom propre they are purely internal constructs, separate but complementary.' Teubner, above n 239, 1458.

[255] Teubner, Bankowska and Adler, above n 65, 125-6.

[256] Ibid 133-4. Teubner argues that while contractual arrangements are quick and flexible they are inadequate in fully exploiting 'organizational surplus value.' This value, he argues, arises from three sources: '(1) long term relationships of co-operation which would continually be destroyed by contractual flexibility; (2) 'commitments' in the organization, which, by contrast with rigid, narrowly circumscribed contractual obligations, make the situation far more flexible; and (3) the orientation of the actors towards the interests of the organization, which has more pulling power than a purposive view of contract.' Ibid 140.

[257] Ibid 140.

[258] Ibid 17, 143-4.

[259] Teubner, Bankowska and Adler, above n 65, 17 quoting Zolo D, 'The Epistomological Status of Theory of Autopoiesis and its Application to the Social Sciences' in Febbrajo A and Teubner G (ed) State, Law, Economy as Autopoietic Systems: Regulation and Autonomy in a New Perspective (Milan: Giuffrè, 1992) 67.

[260] Luhmann, above n 247, 1438-9.

[261] Münch, above n 247, 1464-5.

[262] Luhmann N, 'Closure and Openess: On Reality in the World of Law' in Teubner, above n 238, 335.

[263] The growth of financial interests associated with the financial markets and the public debt and the great 'monied companies', the Bank of England, the East India and the South Sea created a new moneyed class and destroyed the old system of open city government. Rogers N, Whigs and Cities:Popular Politics in the Age of Walpole and Pitt (Oxford: Clarendon Press, 1989) 14. They launched, apart from the South Sea Company, a number of other speculative enterprises involving fictitious wealth and straddling foreign trade and public funds. Their power is shown in the Bubble Act. The parliament banned unchartered joint stock companies, not to protect the investing public but the South Sea Company and other enterprises licensed by the state to the moneyed interest from the diversion of possible funds into other speculative schemes. Endleberger CP A Financial History of Western Europe (London: George Allen & Unwin) 196-7. In London there were also competing versions of law. What the lawyers made a criminal offence in the drafting of the Bubble Act they undid for others by combining concepts of the trust and partnership to reproduce the unchartered joint stock company outside the control of the state. This is the ancestor of the modern company in the common law world outside the United States. Bone RG, 'Review Essay: Personal and Impersonal Litigative Forms: Reconceiving the History of Adjudicative Representation From Medieval Litigation to the Modern Class Action by Stephen C Yeazall' (1990) 70 Boston University Law Review 213, 238, 241.

[264] Thompson EP, Customs in Common (Harmondsworth: Penguin, 1991) 102, citing Pierre Bourdieu, Outline of a Theory of Practice, Cambridge, 1977, chapter 4 which he acknowledges is a gloss on Bourdieu's concept. Bourdieu P, 'The Force of Law: Towards a Sociology of the Juridical Field' (1987) 38 Hastings Law Journal 805, 814. Bourdieu recognises that his theory is similar to that of Luhmann but he argues that Luhmann has confused the symbolic domain with the social field in which it is produced leading to a functionalist and organicist view. McCahery and Picciotto, above n 49, 253.

[265] The quotation continues: 'Each encroached on the usages of others. The rich employed their riches, and all the institutions and awe of local authority. The middling farmers, or yeoman sort, influenced local courts and sought to write stricter by-laws as hedges against both large and petty encroachments; they could also employ the discipline of the poor laws against those beneath them, and on occasion they defended their rights against the rich and powerful at law. The peasantry and the poor employed stealth, a knowledge of every bush and by-way, and the force of numbers. It is sentimental to suppose that, until the point of enclosure, the poor were always the losers. It is deferential to suggest that the rich and great might not act as law-breakers and predators.' Thompson, above n 264, 102-3. Again in the forests Thompson notes that custom in respect of the forests was based on claim and counter-claim supported on various basis by different communities and individuals with an interest in the forest. Thompson EP, Whigs and Hunters (Harmondsworth, Penguin, 1994), 31-2.

[266] Thompson, above n 264, 2.

[267] Harvey D, The Condition of Postmodernism: An Inquiry into the Origin of Cultural Change (Blackwells, Cambridge, Mass, 1989) 62-3.

[268] Thompson, above n 264, 3-6.

[269] Thompson, above n 264, 10-11.

[270] Ibid 11.

[271] Ibid. Hartog, above n 70, 899-900, 931.

[272] 'A custom ... is not necessarily a practice confirmed by judicial doctrine or statute. Legal authority may emerge from numbers of governmental and quasi-governmental institutions and practices. Prosecutorial discretion, bureaucratic inertia, fiscal incapacity may all play parts as sources and justification for the practice, as may the realization that the action against the custom might undermine the legitimacy or effectiveness of the political order.' Ibid 935. ' In a modern, complex, and highly differentiated society such as ours, government is, after all, only one major system among others: the economy, the mass media, the educational system, the family, science, religion, the medical system, and so forth. Government is not an overarching whole of which these are parts, as in the ancient polis; nor is it the pinnacle of a social hierarchy, as in feudal kingdoms; nor the center of society, as in the court of the Sun King. Rather, as Niklas Luhmann writes, ours is a society 'without summit and without center.'' (footnotes omitted) Galanter M and Luban L, 'Poetic Justice: Punitive Damages and Legal Pluralism' (1993) 42 American University Law Review 1393, 1400-01.

[273] Hartog, above n 70, 934-5.

[274] Thompson, above n 265, 146 and note 2.

[275] 'The ruling class projected an image of itself as bound by the law. They were constrained by their announcement that this is the way the game was played. They could not break the rules or the game would given away. The other classes did not shrug off this as rhetoric but also embraced it in the idea of the free born Englishman and the rule of law. If the law had been taken away the royal prerogative or the prerogatives of the aristocracy may have engulfed the property of the gentry.' Thompson, above n 265, 264.

[276] In Customs in Common he specifically considers the civil law and concludes: 'The civil law afforded to the competing interests both a set of defences to their property and those rules of the game without which all would have fallen into anarchy. The higher institutions of the law were not free from influence and corruption, but they were freer of them than was any other profession. To maintain their credibility, the courts must sometimes find for the small man against the great, the subject against the King.' Thompson, above n 264, 34-5.

[277] A mature legal system can establish a legitimacy for legal rules which can be used to give confidence to investors. Weber M, Roth G and Witich C (eds), Economy and Society: An Outline of Interpretative Sociology 31, 1968 reprinting Weber M, 'The Theory of Social and Economic Organisation' 124-5 (A Henderson & T Parsons trans 1947). He argued that legitimacy contemplates a widespread belief that an order is obligatory or exemplary, that this belief is a reason for action, and is associated more with conformity than with self-interest. Hyde A, 'The Concept of Legitimisation in the Sociology of Law' [1983] Wisconsin Law Review 379 challenged this assumption as vague and inaccurate. He argued that the law cannot legitimate any social order and that most of what is taken to be the power of the legal order is the convergence of legal doctrine and self interest. He claims that there is no proof that law affects beliefs which in turn affects behaviour. Ibid 379, 385.

[278] The yeomanry particularly turned to law where there copyhold and customary tenures were strong. Searle CE, 'Custom, Class Conflict and Agrarian Capitalism: The Cumbrian Customary Economy in the Eighteenth Century' (1986) Past and Present 110, 121-32.

[279] Imbrication of a popular sense of justice which both followed, and departed from the law, is shown by a number of Hampshire people charged under the Act who were tried and executed in London. They complained because they had been tried outside their country. Thompson, above n 265, 154-5. They also regarded the stealing of deer as the poaching of wild game and very different from stealing domestic horses and cows making their punishment even more unjust. Ibid 162. For an example of a 'received collective memory' of a tradition of natural justice and social justice which could be in conflict with the civil and criminal law in a mining community proletarianised by the industrial revolution see Francis H, 'The Law, Oral Tradition and the Mining Community' (1985) 12 Journal of Law and Society 267, 268.

[280] Harvey, above n 267, 44, 98. Gordon wrote that Thompson was 'determined to write history through the eyes of people who had been crushed under the wheels of history, especially the wheels of economic 'progress'.' Gordon RW, 'EP Thompson's Legacies' (1994) 82 Georgetown Law Journal 2005, 2005.

[281] Robert Fine, 'The Rule of Law and Muggletonian Marxism: The Perplexities of Edward Thompson' (1994) 21 Journal of Law and Society 193, 198.

[282] Harvey, above n 267, 45.

[283] Ibid 52. As Harvey notes Habermas seeks to return to the dialogue of the Enlightenment.

[284] R v Dodd [1808] EngR 224; (1808) 9 East 516. This appears to be amongst the first prosecutions under the Bubble Act for 87 years. Uncertainty whether joint stock companies were illegal at common law continued after the Bubble Act was repealed. Andrews, above n 55, 18.

[285]

[286] Bottomley notes the paradox that law plays little part in the corporate bureaucracy but that some external force like law is needed to produce change. Bottomley S, 'Book Review: Moral Mazes: The World of Corporate Managers by Robert Jackall, 1988, Oxford, Oxford University Press' (1991) 1 Australian Journal of Corporate Law 192, 197. Tomasic and Bottomley reached this conclusion in their study of Australian company directors. Andrews N, 'Jumbucks in the Bosses' Tuckerbags: Book Review: Directing the Top 500: Corporate Governance and Accountability in Australian Companies by Roman Tomasic and Stephen Bottomley' (1993) 3 Australian Journal of Corporate Law 271, 274-6.

[287] Taxonomy has played some role in jurisprudence since Roscoe Pound's doctoral thesis proposing a taxonomy of plants from Nebraska influenced his classification of 'fields of legal order'.Pound R, 'The Theory of Judicial Decision' (1923) 36 Harvard Law Review 940, 958. Cotterell R, The Politics of Jurisprudence: A Critical Introduction to Legal Philosophy (London: Butterworths, 1989) 159-64.

[288] Jerome Frank, as a judge wrote: 'the conventions of judicial opinion-writing - the uncolloquial vocabulary, the use of phrases carrying with them the idea of finality, the parade of precedents, the display of seemingly rigorous logic bedecked with 'therefores' and 'must-be-trues' - give an impression of certainty (which often hypnotizes the opinion writer) concealing the uncertainties inherent in the judging process.' Frank J, dissenting, in United States v Rubinstein 151 F 2d 915, 923 (1945: 2nd Cir).

289 Endicott TAO, 'Linguistic Indeterminacy' (1996) 16 Oxford Journal of Legal Studies 667, 668.

[290] Hart, above n 72, 278. Cardozo, above n 17, 130.

[291] Zapf and Moglen, above n 78, 485.

[292] It is used to indicate that words dictate meaning. Hoy DC, 'Interpreting the Law: Hermeneutics and Poststructuralist Perspectives' (1985) 58 Southern California Law Review 135. It is used to deny the position that words have universally valid meanings. Kennedy K, 'The Turn to Interpretation' (1985) 58 Southern California Law Review 251. It has come to have a sense of how the different perspectives or views present in law affect interpretation. Brest P, 'Who Decides?' (1985) 55 Southern California Law Review 661, 662.

[293] 'In all fields of experience, not only that of rules, there is a limit, inherent in the nature of language, to the guidance which language can provide. There will indeed be plain cases constantly recurring in similar contexts to which general expressions are clearly applicable ... where there is general agreement in judgments as to the applicability of the general terms ... but there will also be cases where it is not clear whether they apply or not.' Hart, above n 72, 123. Hart adopted the concept of 'open textured' from Waismann: '[H]owever smoothly they work over the mass of ordinary cases, [they will], at some point where there application is in question, prove indeterminate; they have what has been termed and open texture ... uncertainty at the bordeline is the price to be paid for the use of general classifying terms.' Waismann F, 'Verifiability' in Flew A (ed), Logic and Language quoted in Waluchow, above n 75, 237.

[294] Endicott, above n 289, 671-81. Zapf and Moglen argue that a number of arguments that the law is radically indeterminate is based on a misunderstanding of Wittgenstein's Philosophical Investigations but that Wittgenstein offered a persuasive account of why the relations between words and their applications are unproblematic. Zapf and Moglen, above n 78, 485.

[295] Endicott, above n 289, 681-87. For an example of how this occured with the concept of 'legal positivism' see Greenawalt, above n 81, 4-6.

[296] Endicott, above n 289, 668, 687-8.

[297] Kress K, 'Legal Indeterminacy' (1989) 77 California Law Review 283, 287. Zapf and Moglen attribute the present prevalence of this idea to Fuller as a result of his attack on Hart's argument that words, and legal rules, have a core meaning with a penumbra of uncertainty. He argued that the penumbra was much greater than Hart allowed. Frank and Cohen had, however, popularised the idea in the 1920s. Zapf and Moglen, above n 78, 489, 518.

[298] Schauer sees this as a significantly American phenomenon legal theory issue with its focus on the appellate court room. It is common to find that the rules of language are contingent with no claims to be determinate. On the other hand the language cannot be completely indeterminate as this denies the ability to communicate. He acknowledges however indeterminacy may flow from a conflict between rules, or the absence of a rule. He argues that courts are a poor place to look for samples as the Llewellyn 'selection effect' is at work. Court cases are a skewed sample of legal events with the cases litigated being the hard cases not falling squarely within the legal rules. Schauer, above n 73, xi, xii-xiii. Schauer is too severe if moderate indeterminacy is his target. The expectations which people place on the courts has been induced by the idea of the rule of law under which claims are made that it is different from the 'rule of men.' The idea does exist in a number of other jurisdictions and is not limited to common law appeal courts. The dark shadow of the unknown cases which did not go to court is difficult to see through. Llewellyn may be right about some of them but is unlikely to be right about all of them. If the law is doubtful parties, particularly in commercial disputes, are likely to seek resolution by negotiation and compromise.

[299] Endicott, above n 289, 669, 696.

[300] Lord Hoffman, for the Board, stated: 'But a reference to the company 'as such' might suggest that there is something out there called the company of which one can meaningfully say that it can or cannot do something. There is in fact no such thing as the company as such, no ding an sich, only the applicable rules. To say that a company cannot do something means only that there is no one whose doing of that act would, under the applicable rules of attribution, count as an act of the company.' Meridian Global Funds Management Asia Ltd v Securities Commission [1995] UKPC 5; [1995] 2 AC 500, 507. This is reminiscent of the American realists' approach to the company. Mitchell described legal fictions, such as the company, as 'a device for attaining a desired legal consequence, or avoiding an undesired consequence.' Mitchell L, 'The Fictions of the Law: Have They Proved Useful or Detrimental to its Growth' (1893) 7 Harvard Law Review 249, 253.

[301] Teubner G, 'Enterprise Corporatism: New Industrial Policy and the 'Essence of the Legal Person' in Daintith T and Teubner G Contract and Organisation: Legal Analysis in the Light of Economic and Social Theory (Berlin: Walter de Grutyer, 1986) 130, 147.

[302] Llewellyn observed: 'The words 'legal certainty' seem to evoke in most lawyers' minds an image of simply being able to apply an existing rule of law deductively. We are used to thinking like this, particularly since judicial opinions and legal discourse must always be dressed up in this way so as to be socially acceptable. My claim would be, though, that for the cases which occassion difficulties, this kind of legal certainty never has existed and never will exist; that to strive for this kind of certainty is a waste of time; and that legal certainty really consists of something quiet different ... .' Llewellyn, above n 182, 73.

[303] Gianformaggio, above n 26, 402-3. The usefulness of this method of argument has been questioned in the physical sciences. Kuhn suggested a paradigm shift in science in the 1960s. Scientists, he claimed, were no longer convinced by the old paradigm that explanation could be found in the accumulation of knowledge. There was growing belief that particular conclusions were arrived at because of prior investigations, accidents both in the laboratory and in personality, of paradigm shift in the scientific thought. Quantum mechanics was the new paradigm. Kuhn TS, The Structure of Scientific Revolutions (Chicago: University of Chicago Press, 2d ed, 1977) 2, 4, 187-98. This was severely criticised by other scientists, Suppe F, The Structure of Scientific Theories, (Champaign, Ill: University of Illinois Press, 2nd ed, 1977) 636-49.

[304] Gianformaggio, followingMacCormack, has sought to develop a gradation of reasoning with judges to useconsistency, compatibility and congruity or rational adequacy. Gianformaggio, above n 26, 402, 403, 406-7.

[305] This also applies to economists who model the company to generate legal norms. Hart identifies a number of views including: the neoclassical which treats it as a production function run by a selfless manager which fails to deal with incentive problems within the firm and ignores its internal organisation; the agency which seeks to inject the problem of incentives in the neoclassical view but which does not explain why the firm has boundaries; and, transaction costs which seeks to explain why the firm has boundaries in the costs of writing a complete contract. Hart O, Firms, Contracts and Financial Structure (Oxford: Oxford University Press, 1995) Chapter 1: Established Theories of the Firm' 15-28.

[306] Teubner G, 'Enterprise Corporatism: New Industrial Policy and the 'Essence of the Legal Person' in Daintith T and Teubner G Contract and Organisation: Legal Analysis in the Light of Economic and Social Theory (Berlin: Walter de Grutyer, 1986) 130, 137.

[307] Ibid 146.

[308] Ibid 145.

[309] Popper KR, Rejections and Refutations, (London: 3rd ed, 1969) 313-4 and note 4. Dialectic is based on a Greek expression which may be translated as 'the argumentative use of language'. Hegel used the term to mean a theory of argument 'which maintains that something - more especially, human thought - develops in a way characterized by what is called the dialectic triad: thesis, antithesis, and synthesis. First there is some idea or theory or movement which may be called a 'thesis'. Such a thesis will often produce opposition, because, like most things in the world, it will probably be of limited value and have its weak spots. The opposing idea or movement is called the 'antithesis', because it is directed against the first, the thesis. The struggle between the thesis and the antithesis goes on until some solution is reached which, in a certain sense, goes beyond both thesis and antithesis by recognising their respective values and by trying to preserve the merits and to avoid the limitations of both. This solution, which is the third step is called the synthesis.'

[310] Posner R, The Problem of Jurisprudence (Cambridge, Mass: Harvard University Press, 1990) 259.

[311] Mannolini J, 'The Reform of Takeovers Law - Beyond Simplification' (1996) 14 Company and Securities Law Journal 471, 478.

[312] Quine continues: 'But [this] leaves much unsaid. The argument that sustains a paradox may expose a buried premise or some preconception previously reckoned as central to physical theory, to mathematics, or to the thinking process. Catastrophe may lurk, therefore, in the most innocent-seeming paradox. More than once in history the discovery of paradox has been the occasion for major reconstruction at the foundations of thought.' Quine WV, The Ways of Paradox and Other Essays (Cambridge, Mass: Harvard University Press, rev and enlarged ed, 1976) 1.

[313] Hicks JC, 'The Liar Paradox in Legal Reasoning' (1971) 29 Cambridge Law Journal 275 and Goldstein L, 'Four Alleged Paradoxes in Legal Reasoning' (1979) 38 Cambridge Law Journal 373 who both seek to resolve it by using logical solutions to problems of self-reference. Quine discusses these solutions. Quine, above n 312, 6-10. Quine WV, Quiddities: An Intermittently Philosophical Dictionary (Cambridge, Mass: Belknap Press, 1987)145-9.

[314] The circular reference in Australian corporate law is discussed by Finn PD, Fiduciary Obligations (Sydney: Law Book Company, 1977) 66. Teubner, above n 306, 147. Teubner says of this: '(1) the traditional demarcations between the enterprise, the legal person, and its substratum are to be interpreted as attempts to avoid self-referentiality in corporation law. Under this smokescreen, however, self-referentiality was able to make its way into the reality of the enterprise: (2) If the taboo of self-referential circularity is broken, the view opens up on a self supporting construction: the 'subject' (Träger) of the enterprise is the collectivity, constituted as legal person; the 'substratum' of the legal person is the enterprise personified as collectivity.' Ibid 148.

[315] Teubner writes: '[L]aw arises from the arbitrary nature of its own positivity. It is the self-referential nature of law, the application of legal operations which gives the law validity. Legal validity cannot be brought in from outside.; it can only be produced within the law. We can agree with Lumannn and say: 'There is no law outside the law, therefore no input or output of law in relation to the social environment of the system.'' Teubner, Bankowska and Adler, above n 65, 2 quoting Luhmann N, Die Soziologische Beobachung des Rechtes (Frankfurt: Metzner, 1986) 20 and following. (footnote omitted).

[316] For this reason Teubner dismisses the major approaches which have been taken to paradox in law: to deconstruct law to create deviationist doctrines, to elaborate distinctions to avoid the self-reference or, in his use of autopoiesis permitting circular references by accepting that self-reference, paradox and indeterminacy are real problems of society and not just errors in constructing reality in law. Teubner, Bankowska and Adler, above n 65, 6-10

[317] Ibid 112-3. His solution, at a high level of generality, relies on 'deparadoxizing paradoxes' by: 'the creative application of paradoxes, in the transformation of the infinite into a finite burden of information, in the translation of indeterminable complexity into determinable complexity.' Ibid 12 quoting Luhmann F, 'Autopoiesis als soziologischer Begriff' in Haferkamp H and Schmid M (ed), Sinn, Kommunikation und Soziale Differenzierung: Beiträge zu Luhmanns Theorie Sozialer Systeme (Frankfurt: Suhrkamp, 1987) 320 and 'The Third Question: The Creative Use of Paradoxes in Law and Legal History' (1988) 15 Journal of Law and Society 153.

[318] Teubner, above n 306, 152.

[319] Ibid 155.

[320] Quine, above n 312, 5.

[321] Karl Llewellyn observed considerable ambiguity in the common law. See Llewellyn KN, Jurisprudence, Realism in theory and practice (Chicago: University of Chicago Press, 1962) Chapter 6, 'Impressions on the conference on precedent', 116-127. Llewellyn, above n 96, 77-91.

[322] Twining, above n 168, 242-243.

[323] Ibid 237-239.

[324] Posner, above n 310, 259. In the Muggletonian sense it does not seem to serve Posner's argument well.

[325] This was further developed by William Blake following the Muggletonians. Its flavour of contradiction is caught by the words Blake put into the mouth of the devil, who represented the God of Reason: 'I tell you no virtue can exist without breaking these ten commandments ... Jesus was all virtue and acted from impulse and not from rules.' Fine, above n 281, quoting Thompson EP, Witness Against the Beast: William Blake and the Moral Law (1993) 51-2.

[326] French retains the concepts, if not the practice, in the distinction between loi and droit. Goodrich, above n 25, 164 note 11 translates and quotes Ewald F, L'Etat Providence (Paris: Grasset, 1986) 433-4: 'The law (loi) was [historically] judged by the name of a law of law (droit); as if one conceived the possibility of the control of law (loi) by the law of law (droit). That has disappeared entirely now: the law of law (droit) is now confounded utterly with positive law; in place of the classical delimitation of the law of law we find substituted a study of sources of law. That is law which is stated as law. A formalism which implies that in place of the control of law by a law of law there is substituted a control of the constitutionality of laws and the jurist is forbidden any critical attitude in the name of the law. With regard to the statement of the law, jurists become technicians, pracitioners of law which itself becomes ever more technical. Their task is simply to put the indefinite proliferation of a more and more complex legislative and regulatory arsenal into order. But it is no longer their task to orientate us as to the definition of a politics of law. They are no longer the guardians of the law.'

[327] Maclean, above n 34, 147.

[328] Goodrich, above n 25, 164 quoting Blanchot M, The Space of Literature (Lincoln, Nebr: University of Nebraska Press, 1982) 99 in which Blanchot describes death as 'the utterly indeterminate, the indeterminate moment and not only the zone of the unending and the indeterminate.'

[329] Goodrich, above n 25, 162-3.

[330] Ibid 164.

[331] As Brennan observes: 'The rules about a company giving assistance in the purchase of its own shares ... do not reflect a canon of personal morality. Indeed, for those who never lift, pierce or rend the corporate veil, the rules may appear to run counter to the company's moral freedom to spend its money on whatever it chooses.' Brennan G, 'Commercial Law and Morality' [1989] MelbULawRw 6; (1989) 17 Melbourne University Law Review 100, 103. Brennan appears to echo Schumpeter's observations on the moral neutrality of property in the company. 'Commercial law, particularly the law relating to corporations, is not able to draw to the same extent as some other branches of law upon the support of moral imperatives which exhibit these characteristics. This is not a defect of commercial law; rather it is a lacuna in the development of moral imperatives. Why is this? Many problems of corporate law relate to the exercise of intangible legal rights. There is not, and perhaps there can never be, a broad consensus on the morality of acquiring or exercising intangible legal rights. Their variety and the differing circumstances in which they arise and in which they operate preclude reliance on any generally accepted standard to govern their creation and exercise. Similarly, there is no relevant moral imperative relating to the use of financial power. Since the medieval abhorrence of usury has been replaced by a search for maximum return on investment, there is no general moral objection to a person laying out his own money in whatever way he chooses. Yet much of the law of commerce has to do with the acquisition and exercise of abstract legal rights and of financial strength.' Ibid

[332] Mason A, 'Corporate Law: The Challenge of Complexity' (1992) Australian Journal of Corporate Law 1, 4. Baxt refers to similar concerns in corporate law expressed by Dawson J and Kirby P. Baxt R, 'Opening Address to the 1992 National Corporate Law Teachers Workshop' (1992) 2 Australian Journal of Corporate Law 6, 8.

[333] Endicott, above n 289, 669, 678.

[334] Balkin, JM, 'Deconstructive Practice and Legal Theory', (1987) 96 Yale Law Journal 743-786. Balkin. provides an illustration of the deconstructive technique from the argument of Atiyah, who is not generally regarded as a deconstructionist, that individual will or intention should not be a basis for obligation in contract. Balkin has argued that: 'Lawyers should be interested in deconstructive techniques for at least three reasons: First, deconstruction provides a method for critiquing legal doctrines; in particular, a deconstructive reading can show how arguments offered to support a particular rule undermine themselves, and instead, support an opposite rule. Second, deconstructive techniques can show doctrinal arguments are informed by and disguise idealogical thinking. This can be of value not only to the lawyer who seeks to reform existing institutions, but also to the legal philosopher and the legal historian. Third deconstructive techniques offer both a new kind of interpretative strategy and a critique of conventional interpretations of legal texts.' Ibid, 743.

[335] O'Neill, above n 2, 157-161.

[336] Ewald notes that Aristotle explained that legal justice is tied up with the law but that particular justice is tied up with the individual which requires for a judgment to be legal, in the sense of just, it must treat equals as equals. Ewald F 'The Law of Law' in Teubner G (ed) Autopoietic Law: A New Approach to Law and Society (Berlin: Walter de Gruyter, 1988) 36, 47. Sophocles noted the indeterminacy produced by human laws conflicting with divine laws in Antigone. Yablon C, Rosenfeld M, 'Autopoiesis and Justice' (1992) 13 Cardozo Law Review 1681, 1681.

[337] Andrews, above n 288. Lipton P, 'Has the 'Interested-Director Cloud Been Lifted? A Comparison Between the US and Australian Approaches.' (1994) 4 Australian Journal of Corporate Law 239, 250-1. 'Fuzzy Law - A Better Way to Stop Snouts in the Trough' (1991) 9 Company and Security Law Journal 1442. Finn P, 'Simplification and Ethics: A Commentary' (1995) 5 Australian Journal of Corporate Law 158.

[338] Bullock, Stallybass and Trombley, above n 203, 523.

[339] Schapiro BJ, 'Law and Science in Seventeenth Century England' in Orson R (ed), Science as Metaphor: The Historical Role of Scientific Theories in Forming Western Culture (Belmont, Calif: Wadsworth Publishing, 1971) 38, 49-58. The advent of quantum mechanics also flowed through to other cultural forms. Lukacs J, 'Quantum Mechanics and the End of Scientism' in Orson R (ed), Science as Metaphor: The Historical Role of Scientific Theories in Forming Western Culture (Belmont, Calif: Wadsworth Publishing, 1971) 293. It has been suggested that science is in an essential way metaphorical or characteristically employs metaphors. For a discussion of these claims see Leatherdale WH, The Role of Analogy, Model and Metaphor in Science(Amsterdam: North-Holland Publishing, 1974) 125-171.

[340] Rottleuthner H, 'Biological Metaphors in Legal Thought' in Teubner G (ed) Autopoietic Law: A New Approach to Law and Society (Berlin: Walter de Gruyter, 1988) 97, 105-6.

[341] Posner, above n 22, 26-7. Dewey asserted: 'that law was best seen as an empirical social science.' Schlegel, above n 22, 8.

[342] Senechal de la Roche R, 'Beyond the Behavior of Law' (1995) 20 Law and Social Inquiry 777, 785 reviewing Black D, The Social Structure of Right and Wrong (San Diego: Academic Press, 1993). Frankford DM, 'Social Structure of Right and Wrong: Normativity without Agents' (1995) 20 Law and Social Inquiry 787, 787 reviewing Black D, The Social Structure of Right and Wrong (San Diego: Academic Press, 1993). Clark wrote of the four stages of capitalism: 'Finally, if we focus on the mechanisms of change, the way in which the institutions in each stage emerged seems roughly analogous to the evolution of species by natural selection. But unlike the random mutation of genes, the origin of the new varieties of roles and institutions in the later stages are to be found in conscious perceptions of their efficiency advantages, by those individuals who played leading roles in initiating examples of the legal rules that constitute and facilitate them. Once made possible and exemplified, the new institutional forms were preferentially selected over competing arrangements by the cumulative decisions of rationally self-interested capitalists.' Clark RC, 'The Four Stages of Capitalism: Reflections on Investment Management Treatises (Book Review)' (1981) 94 Harvard Law Review 561, 569. Clark RC, 'The Interdisciplinary Study of Legal Evolution' (1981) 90Yale Law Journal 1238.

[343] Rubin states 'we inevitably perceive Clark's statements about corporate law as inherently normative, whether Clark thinks they are or not.' Rubin EL, The Practice and Discourse of Legal Scholarship' (1988) 86 Michigan Law Review 1835, 1849.

[344] Edward Stevens Robinson argued that law is 'an unscientific science'. Lawyers are always 'guardians of outworn ideas'. They prefer to follow and borrow ideas from scientists and these ideas are generally filtered through the medium of a social science which can shear them of significant features. Robinson ES, 'Law - An Unscientific Science' (1934) 44 Yale Law Journal 235, 245-6.

[345] Popper KR, The Open Universe: An Argument for Indeterminacy (London: Hutchinson, 1982) 125. Tribe LH, 'The Curvature of Constitutional Space: What Lawyers Can Learn from Modern Physics' (1989) 103 Harvard Law Review 1 uses quantum mechanics to explain developments in law.

[346] Hook S, 'Necessity, Indeterminism, and Sentimentalism' in Hook S (ed) Determinism and Freedom in the Age of Modern Science (New York, Collier, 1961)180, 183. He states that there 'is a pattern of statistical regularity for the swarm of haphazardly moving photons that enable us to make predictions about their aggregate behaviour ... [T]he individual photon is not casually determined and that, by the very nature of our attempt to investigate and describe it, it cannot be ...'.

[347] The common law, with its system of precedent, may be more greatly exposed to such events as the supporters of a codified Roman law pointed out: 'An argument drawn from a like case is very weak and fragile; it falls to the ground when the smallest dissimilitude is found.' Goodrich, above n 25, 180 note 74 quoting Quintilian, Insitutio Oratorio, 5.2. He notes that this was a point taken up in the controversy over the superiority of the common law over the civil law in the seventeenth century and quotes Wiseman's argument against precedent: 'in so many ages, and in such multitude of cases that have occurred, there has not been one found wholly like another, for indeed the dissimilitude and difformity that is among ourselves and whole off-spring of man not in outward form, visage, lineaments, or stature only, but even in our natures, tempers, inclinations, and humours, also makes all the matters we deal in, and the actions which flow from us, disagreeing too. Also in other productions of nature, and the accidents which are commonly ascribed to chance and fortune, there is such a strange and wonderful variety, that nothing is acted, produced, or happens like another, but that in some circumstance or other that does diversify it and make it differ.' Goodrich, above n 25, 180 quoting Wiseman R, Lex Legum, translated as The Law of Laws: Or The Excellency Of The Civil Law (London: Royston, 1664) 41.

[348] Popper, above n 345, 125. Popper posits his indeterminacy as a reaction to determinism posited by Laplace in 1819 in his Essai philosophique sur les probabilités: 'We ought ... to regard the present state of the universe as the effect of its anterior state and as the cause of the one which is to follow. Assume ... an intelligence which could know all the forces by which nature is animated, and the states at an instant of all the objects that compose it; ... for [this intelligence], nothing could be uncertain; and the future, as the past, would be present to his eyes.' Ibid, xx quoting La Place, A Philosophical Essay on Probabilities (1951) 4-5. He argues that 'Though we must ... be metaphysical indeterminists, methodologically we should still search for deterministic or causal law - except where the problems to be solved are themselves of a probabilistic character.)' Ibid 149.

[349] Parker D and Stacey A, Chaos, Management and Economics: The Implications of Non-Linear Thinking (Sydney: Centre for Independent Studies, 1995) 6.

[350] A member of parliament, concerned about breaches of fiduciary duty, persuades a minister to introduce a law penalising company directors who breach their duties. Once enacted a prosecution is brought by the regulatory agency. It engages a counsel who persuades a judge that the duty was breached. The judge then imposes a fine as a penalty. As a result the sheriff's officers come an seize the director's goods to satisfy the penalty. He sees the chains of relationship in law breaking down for four reasons. Some of the intermediate relations may be weak leading to a whole chain breaking down. These relations may be mixed relations partly dependent on power and other factors so that, for example, the officer of the regulatory agency involved may not be sufficiently senior to persuade the senior officers to take action. There may be several chains between the minister and the citizen. Some of these chains may involve coercion and persuasion in both directions. Finally the chains may may take a different route for different citizens, such as where the company director is the national president of the political party to which the minister belongs. Sampford C, The Disorder of Law (Oxford: Blackwell, 1995) 231-2. This is borne out by Tomasic's and Bottomley's study of Australian directors and the actions of regulatory agencies. Andrews, above n 288, 277-8. Grabosky's and Braithwaite's study of the practices of regulatory agencies also reached similar conclusions.Grabosky P and Braithwaite J, Of Manners Gentle: Enforcement Strategies of Australian Regulatory Agencies (Melbourne: Oxford University Press, 1986) 1-2, 10-25. Fisse and Braithwaite also address regulatory failure in the corporate sector. Campbell D, 'Brent Fisse and John Braithwaite, Corporations, Crime and Accountability. Cambridge: Cambridge University Press, 1993' (1996) 5 Social and Legal Studies 549, 549.

[351] Chaos Theory has a number of definitions in various sciences: 'The larger framework that chaos emerges from is the so-called theory of dynamic systems. A dynamical system consists of two parts: the notions of state (the essential information about a system) and a dynamic (a rule about how the state evolves with time) quoting Crutchfield JP, Farmer JD, Packard NH and Shaw RS, 'Chaos', Scientific American, (December, 1986) 46, 49 quoted in Merry U, Coping with Uncertainty: Insights from the New Sciences of Chaos, Self-Organization and Complexity (Westport, Conn: Praeger, 1995) 11; 'Where chaos begins, normal science ends ... Chaos Thoery is the theory of postmodern society par excellence. In theory as in practice, there are no stable enduring clock-like relationships; no eternal fixed truths, no stable enduring theoretical relationships given by Nature or God in the world we find when we look closely at it. In chaos paradigm, all theory is, in the first instance change theory.' Young TR, 'A Metaphysics for the Post-Modern' The Social Dynamicist 2,2 1991 5 quoted Ibid, 11.

[352] Parker and Stacey, above n 349, 6.

[353] Lindsay G, 'Foreword' in Parker and Stacey, above n 349, 18-24. Hayes AW, 'An Introduction to Chaos and Law' (1992) UMKC Law Review 751, 757-9.

[354] Lindsay, above n 353, 18.

[355] Ibid. Hayes, above n 253, 760 and note 50 refers to one phenomenon familiar to most Australians from weather reports, the El Nino effect.

[356] Lindsay, above n 353, 26.

[357] Teubner, Bankowska and Adler, above n 65, 48-9. Teubner writes: 'I think that a theory of legal evolution has great analytical and practical power if it stops claiming to be able to explain individual events and concentrates instead on explaining structural patterns. Evolutionary theory is concerned with - and should be limited to - how the filter mechanims of variation, selection, and stabilization interact. Certainly individual events cannot be predicted by structure alone. Additional explanations are necessary in order to bridge the gap between structure and events. From the point of view of evolutionary theory, these appear accidental. Causal analyses of a different kind must come in. A theory of legal evolution will be able to explain or even predict general structures of the law. It will not, however, be able to explain individual legal acts, court verdicts, laws, and administrative acts.' Ibid 49.

[358] Sampford C, The Disorder of Law: A Critique of Legal Theory (Oxford: Blackwell, 1989) 203.

[359] Ibid 223.

[360] Ibid 249. In particular in his chain analysis he notes that the links provide opportunities for the law to produce an effect quite different from that expected by the iniator of the action. There is variation in the ability of individuals, groups and institutions to affect the action of legal officials. There is the same variation in their ability to affect the appointment to particular positions. There is conflict between legal institutions which increases, or reduces, the official's discretion. Some legal institutions have a greater power than others in achieving the effects of the exercise of law. This results in the effects of law being 'relatively crude, conflicting incomplete and nonuniform.' Ibid 252.

[361] Ibid 149.

[362] 'What it offers at this critical evolutionay juncture is the first interdisciplinary understanding of bifurcational and transformational change. But to achieve this new understanding social scientists must understand natural scientific chaos theory, natural scientists must understand the social scientific potential, and must better understand how advancements at both levels relates to the overriding evolutionary challenge.' Loye D and Eisler R, 'Chaos and Transformation' Behavioral Science (1987) 32, 54 quoted in Merry, above n 351, 11-2. Hayes discusses related developments in public policy where pure rationality has been unable to capture reasoning in public policy, Hayes, above n 353.

[363] Scott RE 'Chaos Theory and the Justice Paradox' (1993) 35 William and Mary Law Review 329, 331 refers to its use in law referring to the metaphor that chaos theory 'concerns the notion that the laws of the physical world cannot predict what is going to happen in the future. This is not because the laws are invalid, but because even when we understand the interactions very well, and even when the applicable laws are quiet accurate and clear, results in specific cases can be still impossible to predict - even though recurring patterns are discernable and remarkably durable. In sum, there is chaos in order, and there is order in chaos.' Wolfson N, 'Efficient Markets, Hubris, Chaos, Legal Scholarship and Takeovers' (1989) 63 St Johns Law Review 511. Hayes, above n 353, 751. Ladeur has suggested that the uncertainty in law should lead to it being orientated towards 'proceduralizing'. Ladeur K-H, 'Perspectives on a Post-Modern Theory of Law: A Critique of Niklas Luhmann, 'The Unity of the Legal System'' in Teubner G (ed) Autopoietic Law: A New Approach to Law and Society (Berlin: Walter de Gruyter, 1988) 242, 272-6. Kennealy P, 'Talking About Autopoiesis - Order from Noise' in Teubner G (ed) Autopoietic Law: A New Approach to Law and Society (Berlin: Walter de Gruyter, 1988) 349, 358.

[364] Parker and Stacey, above n 349; Merry, above n 349; Sinfonis John G and Goldberg B, Corporation on a Tightrope: Balancing Leadership, Governance, and Technology in an Age of Complexity (New York: Oxford University Press, 1996). Sinfonis and Goldberg, for example, propose a chaos form of corporate management structure, Ibid 28. They state: 'Chaos, turbulence, white water are all used to refer to the condition the world is in, and nowhere is that description more true than in business. In this world, new products become commodities in months, and technological innovation is history before it takes hold.' Ibid 23-4. Teubner's use of system theory approaches it a number of places including an analogy with ecological development. Teubner, above n 239, 1461-2.

[365] There appears to be hidden complexity in many forms of social life involved in both economics and companies. Parker and Stacey, above n 349, 7-9.

[366] Buxbaum, who appears to support Teubners' autopoietic vision, noted that in the US courts were resisting attempts by shareholders to challenge corporate management on the basis of reasons coming from law and economics literature. Buxbaum R, 'Legitimation Problems in American Enterprise Law' in Teubner G (ed) Juridification of Social Spheres: A Comparative Analysis in the Areas of Labor, Corporate, Antitrust and Social Welfare Law (Berlin: Walter de Gruyter, 1987) 241, 268.

[367] These are some of the general arguments used by Roe. Roe MJ, 'Chaos and Evolution in Law and Economics' (1996) 109 Harvard Law Review 641-668. This is not an entirely new insight. Historic contingency was used by Harrison, Professor of Jurisprudence in the Inns of Court, as a justification for students not study legal history. It would detract from the symmetry, wisdom and scientific correctness of law as it exists. Harrison F, 'The English School of Jurisprudence III' (1879) 21 Fortnightly Review 114, 115-6.

[368] Sinfonis and Goldberg, above n 364, 29 quote Stuart A Kauffman: 'Complex systems constructed such that they are poised on the boundary between order and chaos are the ones best able to adapt by mutation and selection. Such poised systems appear best able to coordinate complex, flexible behaviour and best able to respond to changes in their environment.'The Origins of Order (New York: Oxford University Press, 1993).

[369] McQueen, above n 56, 12-13.

[370] Twining W and Miers, How to Do Things with Rules (London: Weidenfield and Nicolson, 3rd ed , 1992) 320. Stone J Precedent and law dynamics of common law growth (Sydney: Butterworths, 1985) 2.

[371] Twining and Miers, above n 370, 320

[372] Llewellyn, above n 96, 340.

[373] Rock EB, Saints and Sinners: The Perculiar Mechanisms of Delaware Corporate Law: Discussion Paper #193 (Philadelphia, PA: Institute for Law and Economics, University of Pennsylvania, March 1996) 2-6, 63-73.

[374] Hayes AW, 'An Introduction to Chaos and Law' (1992) UMKC Law Review 751, 767-8.

[375] Sinfonis and Goldberg, above n 364, at 163 cite M Mitchell Waldrop: 'Control of a complex adaptive system tends to be highly dispersed ... [It] has many levels of organization, with agents at one level serving as the building blocks for agents at a higher level ... [and they] are constantly revising and rearranging their building blocks as they gain experience.' Complexity: The Emerging Science at the Edge of Chaos (New York: Touchstone, 1992).

[376] Lindsay, above n 353, 27. Wolfson, above n 363, 511. Wolfson refers in particular to the hypothesis of Richard Roll, 'The Hubrid Hypothesis of Corporate Takeovers' (1986) 59 Journal of Business 197. Rolls argues that bidders have acted irrationally in takeovers offering more than the target is worth by erroneously convincing themselves that their valuation is correct. Ibid 517-26. He notes other research which also points to irrational behaviour in the stock market in the context of arguing that the chaos theory provides some explanation particularly as fractal patterns can be found across a number of markets. Ibid 527-34. This view of the market supports popular perceptions. These are stories in the financial section of the Australian newspaper on two days in January 1997. Stewart reports: 'American investors, undeterred by the wild swings on Wall Street in recent months and cautious forecasts from analysts about 1997, having been pouring money into mutual funds at a record rate so far this year.' Stewart C, 'Investors Throwing Caution to the Wind' Australian (16 January 1997) 21. Wood asks: 'Is the link between Wall Street and Australian share markets important for the Australian economy? The question has particular relevance at the moment, with US share prices obviously vulnerable to a correction.' Wood A 'Watch Our Wheels Fall Off If Dow Hits Brakes' Australian (16 January 1997) 21. Adams W, 'All Ords Piggybacks US to Record' Australian (16 January 1997) 21. Blue reported: 'Since 1990, predictions of a stock slide have been proved repeatedly wrong, the Dow almost tripling in three years.' Blue T, 'Wall Street in Fear of Overdue Correction' Australian (27 January 1997) 19. Westfield M, Wall St Run Near End as Trading Turns Volatile' Australian (27 January 1997) 26. Garran reported the same day: 'The recent slump in the Japanese share market has fuelled the risk of a financial crisi that could have global ramifications, according to the Nomura Research Institute. A senior economist at the Nomura, Mr Nobuya Nemoto, warned ... Mr Nemoto displayed a chart showing a close similarity between the performance of Japanese markets after World War I and after the 1980s boom ended. The chart suggested that if the Japanese market kept following the pattern of the 1920s it would suffer another substantial fall.' Garran R, 'Japanese Slump Likely to Have World Wide Ramifications' Australian (27 January 1997) 19.

[377] Lindsay, above n 353, viii, 68.

[378] Hook, above n 346, 180.