Course:Law3020/2014WT1/Group M/Liberty-Paternalism

Paternalism and the restriction of liberty
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Where Mills philosophy provides the government with very little latitude to pass laws for an individuals own protection Dworkin accepts that such legislation may be appropriate where a pressing social objective exists. Although H v S does not deal with coercive legislation passed by parliament but instead with a common law rule regulating business transactions the debate between liberty and paternalism is relevant to the question of whether such a rule is legitimate. Dworkin said in his article Paternalism: “in addition to laws which attach criminal or civil penalties to certain kinds of actions there are laws rules regulations and decrees which make it either difficult or impossible for people to carry out their plans which are also justified on paternalistic grounds” (Dworkin, paternalism part 2). These include cases of impure paternalism, rules which aim to “ protect the welfare of a class of persons” by “restricting the freedom of other persons besides those who are benefited” (Dworkin Paternalism part 3).

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Although the rule in H v S is not a direct government legislation, it does fall under the* of a common law rule which attempts to protect one class of persons by limiting the liberty of another. Specifically H v S imposes an fiduciary obligation on financial planners to disclose any conflict of interest or potential conflict of interest they might have. This is not an outright prohibition, the common law rule in question would almost certainly be justifiable according to Dworkin’s philosophy because it aims to address the harmful affect of vulnerable investors relying on bad advice based on the ulterior motives of financial planner. The common law rule described in H v S also falls within Dworkin’s principle of “least restrictive alternative” namely that liberty should be restricted as little as possible in achieving the desired effect. The fiduciary duty does not prohibition a financial planner with the possible conflict of interest from giving advice but simply requires that he or she disclose the conflict of interest to the Client. The reason for this is to create a level playing field between the parties through open information and disclosure. There is an inherent reliance in expert relationships.

Even according to Mills philosophy the fiduciary obligation to disclose potential conflicts of interest would likely justifiable as a precaution against fraud. For Mills an individual’s ability to exercise liberty depends upon knowledge of his or her own best interests. “With respect to his own feelings and circumstances the most ordinary man or woman has mean of knowledge immeasurably surpassing those that can be possessed by anyone else” (On Liberty, Chapt 4 para 4). In order for this prop to hold true an individual making a decision must have full knowledge of its implications. To base an important investment decision on incomplete information could seriously harm an investor’s interest therefore by withholding relevant information an investment advisor might well violate the harm principle articulated by Mills. In Mills perhaps this would be a form of harm to a vulnerable person.