On Friday, I attended a memorial service in Cambridge for my former law tutor, John Collier. 'JC' was a brilliant lawyer, who understood not only the fine detail, but also the essence of a legal issue - which he had the knack of setting out with concise clarity. He was both academic and practical. If you arrived at a legal conclusion which lacked common sense, 'JC' would suggest, often in colourful terms, that your reasoning needed revisiting.

It is an approach not limited to the law: a structural engineer whose calculations show that an intact building should have already fallen down needs to check his/her workings. A doctor will have an intuitive feel for what is wrong with a patient at an early stage of a consultation, which is then checked by a more logical 'step by step' diagnosis.

The fact that professionals generally have these two parallel approaches to problem solving is due, perhaps, to the mechanism of the human mind. In his book "Thinking, Fast and Slow", Daniel Kahneman labels as "System 1" the fast, intuitive and automatic type of thinking and as "System 2" the slower, deliberate and controlled type. Both are developed by learning and experience which, in the case of System 1, is distilled into automatic intuition ('common sense'), whereas System 2 is under conscious control and requires effort and logic.

System 1 arrives at its answer by means of the express lift to the top floor. System 2 uses the stairs. What ‘JC’ was teaching was that if you don't arrive at the same place, you need to check your System 2 reasoning, as - contrary to popular belief - the law (at least the common law - i.e. that developed by the courts over time, as opposed to statute law enacted by Parliament) is seldom an ass.

Which takes me to an excellent seminar I attended two days before ‘JC’'s memorial service, given by Brick Court Chambers and chaired by Lord Hoffman, on the vexed issue of how the courts should interpret contracts. Much discussion revolved around the 2015 decision of the Supreme Court in the case of Arnold v Britton in which a majority of four out of five judges upheld a service charge escalation clause, even though it was ruinous for the tenants - the leading judge (Lord Neuberger) admitting that the view of the dissenting judge (not to give the clause its literal effect) would be a "much more satisfactory outcome in common sense terms".

Briefly, the facts were that, in the 1970s, leases were granted of some holiday chalets which included provision to the effect that the amount of the service charge would increase by 10% compound every three years
(later varied to every year). When looked at in the timeframe of decades, the compounding effect meant that the service charge would rise to extraordinary levels. Yet, the majority of the Supreme Court felt constrained to interpret the clause according to its literal wording, rather than so as to accord with "common sense".

The majority of the court was thus aware of its System 1 and System 2 thinking, but decided that the System 1 intuitive approach did not produce the correct answer, preferring the System 2 'step by step' approach.
Whether that produced a result that renders the law an ass is a matter of opinion. Personally, like many others, I prefer the view of the dissenting judge, which would have avoided the apparent injustice wrought by the
majority's view.

It is difficult to imagine that the tenants who agreed the leases in the 1970s would have understood the disastrous compounding effect of the written words to which they signed up. It also difficult to imagine that
the lessor did so. Legally, there was likely to have been another ‘set of stairs’, which for some reason (perhaps lack of evidence) was not climbed, namely that of mistake at common law as to the terms of the contract or
otherwise. 'JC' would have expected his students to have checked that out.

Going back to "Thinking, Fast and Slow", the explanation for the escalation clause having been agreed to by the tenants may well have been that, as the book puts it, "statistics requires thinking about many things at once, which is something that System 1 is not designed to do". By reference to psychology research, the author explains this limitation on intuitive thinking. After the event, the common sense outcome might be that the law should not permit the clause to have its ruinous result, but, at the time, System 1 'common sense' would not have assisted the parties to foresee its compounding effect. People without training and experience may not have a reliable System 2 approach available to them.

'JC', however, might well have had an earthier explanation for the mistake the tenants made. Blunt, but humorous, the man who hated things dark blue (the Tory Party, Birmingham City and Oxford University)
would have probably looked at me briefly, seen a Welshman and said "The chalets were in Wales, what else did you [..... ] expect"

This article was written by Jonathan Haydn-Williams, Senior Counsel, Dispute Resolution, Monday 24th October 2016.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.