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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Pepper (Inspector of Taxes) v Hart [1992] UKHL 3 (26 November 1992)
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Cite as: [1992] UKHL 3, [1993] AC 593

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    Parliamentary Archives,
    HL/PO/JU/18/252

    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Hart (Appellant)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Knee (Appellant)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Knott (Appellant)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Campbell-Ferguson (Appellant)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Southall (Appellant)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Penter (Appellant)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Denny (Appellant)
    Edwards (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    Hunter (Appellant)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.
    Personal Representatives of Colin Nicholls (deceased)

    (Appellants)
    Pepper (Her Majesty's Inspector of Taxes) (Respondent)

    v.

    White (Appellant)
    (Consolidated appeals)

    JUDGMENT

    Die Jovis 26° Novembris 1992

    Upon Report from the Appellate Committee to whom was
    referred the Cause Pepper (Her Majesty's Inspector of Taxes)
    against Hart, Pepper (Her Majesty's Inspector of Taxes) against
    Knee, Pepper (Her Majesty's Inspector of Taxes) against Knott,
    Pepper (Her Majesty's Inspector of Taxes) against Campbell-
    Ferguson, Pepper (Her Majesty's Inspector of Taxes) against
    Southall, Pepper (Her Majesty's Inspector of Taxes) against
    Penter, Pepper (Her Majesty's Inspector of Taxes) against Denny,
    Edwards (Her Majesty's Inspector of Taxes) against Hunter, Pepper
    (Her Majesty's inspector of Taxes) against personal
    representatives of Colin Nicholls (deceased), and Pepper (Her
    Majesty's Inspector of Taxes) against White, That the Committee
    had heard Counsel as well on Monday the 4th day of November last
    as upon Monday the 8th, Tuesday the 9th, Wednesday the 10th,

    Judgment: 26.11.92

    HOUSE OF LORDS

    PEPPER (HER MAJESTY'S INSPECTOR OF TAXES)

    (RESPONDENT)

    v.

    HART

    (APPELLANT)

    AND NINE OTHER APPEALS
    (CONSOLIDATED APPEALS)

    Lord Chancellor
    Lord Keith of Kinkel
    Lord Bridge of Harwich
    Lord Griffiths
    Lord Ackner
    Lord Oliver of Aylmerton
    Lord Browne-Wilkinson


    LORD MACKAY OF CLASHFERN L.C.

    My Lords,

    I have had the advantage of reading in draft the speech of
    my noble and learned friend Lord Browne-Wilkinson. I respectfully
    adopt his narrative of the proceedings in this appeal and his
    account of the statutory provisions by reference to which it falls
    to be decided.

    A fact which I regard as crucial to the decision of these
    appeals is stated by the Special Commissioner [1990] S.T.C. 6, at
    p. 11f-g as follows "on the facts, the taxpayers' sons occupied only
    surplus places at the college and their right to do so was entirely
    discretionary". I regard it as important in considering the benefit
    which is to be subject to taxation that the benefit should be
    identified. The benefit which the taxpayers in this case received
    was the placing of their children in surplus places at the college,
    if as a matter of discretion the college agreed to do so. As I
    read the stated case there was no question of the taxpayers being
    entitled to have their children educated at the school. They were
    in a similar position to the person coming along on a standby basis
    for an airline seat as against the passenger paying a full fare, and
    without the full rights of a standby passenger, in the sense that
    the decision whether or not to accommodate them in the college
    was entirely discretionary. If one regards the benefit in this light
    I cannot see that the cost incurred in, or in connection with, the
    provision of the benefit, can properly be held to include the cost
    incurred, in any event, in providing education to fee paying pupils
    at the school who were there as a right in return for the fees
    paid in respect of them. The expenses incurred by the college
    were all incurred necessarily in order properly to provide for these
    pupils. No further expense over and above that was incurred in,
    or in connection with, the provision of surplus places to the
    taxpayers' children. Although the later words of section 63(2)
    provide that the expense incurred in, or in connection with, the

    provision of a benefit includes a proper proportion of any expense
    relating partly to the benefit and partly to other matters, I
    consider that the expenses incurred in provision of places for fee
    paying pupils were wholly incurred in order to provide those
    places. The benefit conferred upon the taxpayers was one which
    logically followed only when it was determined that there were
    surplus places and the authorities of the college in their discretion
    agreed to admit the taxpayers' children to these places. This
    decision was the decision to provide the benefit to the taxpayers'
    children and this decision involved no further expense on the
    college. I conclude that looking at the matter from the point of
    view of expense incurred and not from the point of view of loss
    to the employer no expense could be regarded as having been
    incurred as a result of the decision of the authorities of the
    college to provide this particular benefit to the taxpayer.

    Notwithstanding the views that have found favour with
    others I consider this to be a reasonable construction of the
    statutory provisions and I am comforted in the fact that, apart,
    from an attempt to tax airline employees, which was taken to the
    special commissioners who decided in favour of the taxpayer, this
    has been the practice of the Inland Revenue in applying the
    relevant words where they have occurred in the Income Tax Acts
    for so long as they have been in force, until they initiated the
    present cases.

    At the very least it appears to me that the manner in
    which I have construed the relevant provisions in their application
    to the facts in this appeal is a possible construction and that any
    ambiguity there should be resolved in favour of the taxpayer.

    For these reasons I would allow these appeals. I should
    perhaps add that I was not a member of the committee who heard
    these appeals in the first hearing since I became involved only
    when your Lordships who sat in the first hearing suggested a
    second hearing under my chairmanship and accordingly I have not
    been asked to consider this matter apart from the discussion of
    the extracts from Hansard which have been put before us in this
    appeal. However, this is the conclusion that I would have reached
    apart altogether from considering Hansard.

    But much wider issues than the construction of the Finance
    Act 1976 had been raised in these appeals and for the first time
    this House has been asked to consider a detailed argument upon
    the extent to which reference can properly be made before a
    court of law in the United Kingdom to proceedings in Parliament
    recorded in Hansard.

    For the appellant Mr Lester submits that it should now be
    appropriate for the courts to look at Hansard in order to ascertain
    the intention of the legislators as expressed in the proceedings on
    the Bill which has then been enacted in the statutory words
    requiring to be construed. This submission appears to me to
    suggest a way of making more effective proceedings in Parliament
    by allowing the court to consider what has been said in Parliament
    as an aid to resolving an ambiguity which may well have become
    apparent only as a result of the attempt to apply the enacted
    words to a particular case. It does not seem to me that this can
    involve any impeachment, or questioning of the freedom of speech

    - 2 -

    and debates or proceedings in Parliament, accordingly I do not see
    how such a use of Hansard can possibly be thought to infringe
    article 9 of the Bill of Rights and I agree with my noble and
    learned friend's more detailed consideration of that matter.

    The principal difficulty I have on this aspect of the case is
    that in Mr Lester's submission reference to Parliamentary material
    as an aid to interpretation of a statutory provision should be
    allowed only with leave of the court and where the court is
    satisfied that such a reference is justifiable:

    a. to confirm the meaning of a provision as conveyed by
    the text, its object and purpose;

    b. to determine a meaning where the provision is
    ambiguous or obscure; or

    c. to determine the meaning where the ordinary meaning
    is manifestly absurd or unreasonable.

    I believe that practically every question of statutory
    construction that comes before the courts will involve an argument
    that the case falls under one or more of these three heads. It
    follows that the parties' legal advisors will require to study
    Hansard in practically every such case to see whether or not there
    is any help to be gained from it. I believe this is an objection of
    real substance. It is a practical objection not one of principle,
    and I believe that it was the fundamental reason that Lord Reid,
    for example, considered the general rule to be a good one as he
    said in the passage my noble and learned friend has cited from
    Beswick v. Beswick [1968] A.C. 58, 74A. Lord Reid's statement
    is, I think, worthy of particular weight since he was a
    parliamentarian of great experience as well as a very distinguished
    judicial member of your Lordships' House. It is significant that in
    the following year, in his dissenting speech in Warner v.
    Metropolitan Police Commissioner
    [1969] 2 A.C. 256, 279 he, while
    agreeing with the general rule was prepared to consider an
    exception from it although not that the time was right to do so.
    But the exception he contemplated was in respect of a particular
    type of statute, namely, a statute creating criminal liability in
    which the question was whether or not a guilty intention was
    required to create liability. Now that type of exception would
    mean that the practical difficulties to which he referred would not
    arise except in the comparatively few cases that arise of the
    particular type. The submission which Mr Lester makes on the
    other hand is not restricted by reference to the type of statute
    and indeed the only way in which it could be discovered whether
    help was to be given is by considering Hansard itself. Such an
    approach appears to me to involve the possibility at least of an
    immense increase in the cost of litigation in which statutory
    construction is involved. It is of course easy to overestimate
    such cost but it is I fear equally easy to underestimate it. Your
    Lordships have no machinery from which any estimate of such cost
    could be derived. Two enquiries with such machinery available to
    them, namely, that of the Law Commission and the Scottish Law
    Commission, in their Joint Report on the Interpretation of Statutes
    (1969) No. 21 and the Renton Committee Report on the
    preparation of Legislation ((1975) Cmnd 6053), advised against a
    relaxation on the practical grounds to which I have referred. I

    - 3 -

    consider that nothing has been laid before your Lordships to justify
    the view that their advice based on this objection was incorrect.

    In his very helpful and full submissions Mr Lester has
    pointed out that there is no evidence of practical difficulties in
    the jurisdictions where relaxations of this kind have already been
    allowed, but I do not consider that, full as these researches have
    been, they justify the view that no substantial increase resulted in
    the cost of litigation as a result of these relaxations, and, in any
    event, the Parliamentary processes in these jurisdictions are
    different in quite material respects from those in the United
    Kingdom.

    Your Lordships are well aware that the costs of litigation
    are a subject of general public concern and I personally would not
    wish to be a party to changing a well established rule which could
    have a substantial effect in increasing these costs against the
    advice of the Law Commissions and the Renton Committee unless
    and until a new enquiry demonstrated that that advice was no
    longer valid.

    I do not for my part find the objections in principle to be
    strong and I would certainly be prepared to agree the rule should
    no longer be adhered to were it not for the practical consideration
    to which I have referred and which my noble and learned friend
    agrees to be of real substance. Reference to proceedings in
    Parliament has already been allowed in Pickstone v. Freemans Plc.
    [1989] A.C. 66 without, I think, any argument upon whether or not
    it was permissible for, ascertaining the purpose of subordinate
    legislation and also in other cases for ascertaining the purpose for
    which a power to make subordinate legislation was used. I believe
    that such statements are likely to be readily identified in
    Parliamentary proceedings and the cases in which they are relevant
    will be determined by the nature of the subject matter. Allowing
    reference to Hansard in such cases does not have the large
    practical consequences to which I have referred. If reference to
    Parliamentary material is permitted as an aid to the construction
    of legislation which is ambiguous, or obscure or the literal meaning
    of which leads to an absurdity, I believe as I have said that in
    practically every case it will be incumbent on those preparing the
    argument to examine the whole proceedings on the Bill in question
    in both Houses of Parliament. Questions of construction may be
    involved on what is said in Parliament and I cannot see how if the
    rule is modified in this way the parties' legal advisors could
    properly come to court without having looked to see whether there
    was anything in the Hansard Report on the Bill which could assist
    their case. If they found a passage which they thought had a
    bearing on the issue in this case, that passage would have to be
    construed in the light of the proceedings as a whole.

    I fully appreciate and feel the force of the narrowness of
    the distinctions which are taken between what is admissible and
    what is not admissible, but the exception presently proposed is so
    extensive that I do not feel able to support it in the present state
    of our knowledge of its practical results in this jurisdiction. For
    these reasons, I agree that these appeals should be allowed,
    although I cannot agree on the main issue, for the discussion of
    which, this further hearing was arranged.

    - 4 -

    LORD KEITH OF KINKEL

    My Lords,

    For the reasons set out in the speech to be delivered by my
    noble and learned friend Lord Browne-Wilkinson, which I have had
    the opportunity of considering in draft and with which I agree, I
    would allow this appeal.

    LORD BRIDGE OF HARWICH

    My Lords,

    I was one of those who were in the majority at the
    conclusion of the first hearing of this appeal in holding the opinion
    that section 63 of the Finance Act 1976, construed by conventional
    criteria, supported the assessments to income tax made by the
    Revenue on the appellants which had been upheld by Vinelott J.
    and the Court of Appeal. If it were not permissible to take
    account of the Parliamentary history of the relevant legislation
    and of ministerial statements of its intended effect, I should
    remain of that opinion. But once the Parliamentary material was
    brought to our attention, it seemed to me, as, I believe, to others
    of your Lordships who had heard the appeal first argued, to raise
    an acute question as to whether it could possibly be right to give
    effect to taxing legislation in such a way as to impose a tax
    which the Financial Secretary to the Treasury, during the passage
    of the Bill containing the relevant provision, had, in effect,
    assured the House of Commons it was not intended to impose. It
    was this which led to the appeal being re-argued before the
    Appellate Committee of seven which now reports to the House.

    Following the further arguments of which we have had the
    benefit, I should find it very difficult, in conscience, to reach a
    conclusion adverse to the appellants on the basis of a technical
    rule of construction requiring me to ignore the very material
    which in this case indicates unequivocally which of the two
    possible interpretations of section 63(2) of the Act of 1976 was
    intended by Parliament. But, for all the reasons given by my
    noble and learned friend, Lord Browne-Wilkinson, with whose
    speech I entirely agree, I am not placed in that invidious situation.

    It should, in my opinion, only be in the rare cases where
    the very issue of interpretation which the courts are called on to
    resolve has been addressed in Parliamentary debate and where the
    promoter of the legislation has made a clear statement directed to
    that very issue, that reference to Hansard should be permitted.
    Indeed, it is only in such cases that reference to Hansard is likely
    to be of any assistance to the courts. Provided the relaxation of
    the previous exclusionary rule is so limited, I find it difficult to
    suppose that the additional cost of litigation or any other ground
    of objection can justify the court continuing to wear blinkers
    which, in such a case as this, conceal the vital clue to the

    - 5 -

    intended meaning of an enactment. I recognise that practitioners
    will in some cases incur fruitless costs in the search for such a
    vital clue where none exists. But, on the other hand, where
    Hansard does provide the answer, it should be so clear to both
    parties that they will avoid the cost of litigation.

    I would allow the appeal.

    LORD GRIFFITHS

    My Lords,

    I have long thought that the time had come to change the
    self-imposed judicial rule that forbade any reference to the
    legislative history of an enactment as an aid to its interpretation.
    The ever increasing volume of legislation must inevitably result in
    ambiguities of statutory language which are not perceived at the
    time the legislation is enacted. The object of the court in
    interpreting legislation is to give effect so far as the language
    permits to the intention of the legislature. If the language proves
    to be ambiguous I can see no sound reason not to consult Hansard
    to see if there is a clear statement of the meaning that the words
    were intended to carry. The days have long passed when the
    courts adopted a strict constructionist view of interpretation which
    required them to adopt the literal meaning of the language. The
    courts now adopt a purposive approach which seeks to give effect
    to the true purpose of legislation and are prepared to look at
    much extraneous material that bears upon the background against
    which the legislation was enacted. Why then cut ourselves off
    from the one source in which may be found an authoritative
    statement of the intention with which the legislation is placed
    before Parliament. I have had the advantage of reading the
    speech of Lord Browne-Wilkinson and save on the construction of
    the Act, without recourse to Hansard, I agree with all he has to
    say. In summary, I agree that the courts should have recourse to
    Hansard in the circumstances and to the extent he proposes. I
    agree that the use of Hansard as an aid to assist the court to
    give effect to the true intention of Parliament is not "questioning"
    within the meaning of Article 9 of the Bill of Rights. I agree
    that the House is not inhibited by any Parliamentary privilege in
    deciding this appeal.

    I can not agree with the view that consulting Hansard will
    add so greatly to the cost of litigation, that on this ground alone
    we should refuse to do so. Modern technology greatly facilitates
    the recall and display of material held centrally. I have to
    confess that on many occasions I have had recourse to Hansard, of
    course only to check if my interpretation had conflicted with an
    express Parliamentary intention, but I can say that it does not
    take long to recall and assemble the relevant passages in which
    the particular section was dealt with in Parliament, nor does it
    take long to see if anything relevant was said. Furthermore if the
    search resolves the ambiguity it will in future save all the expense
    that would otherwise be incurred in fighting the rival
    interpretations through the courts. We have heard no suggestion
    that recourse to Parliamentary history has significantly increased
    the cost of litigation in Australia or New Zealand and I do not
    believe that it will do so in this country.

    - 6 -

    As to the question of statutory construction I should myself
    have construed the section in favour of the taxpayer without
    recourse to Hansard. The crucial question is the meaning of the
    words "the cost of a benefit is the amount of any expense
    incurred in or connection with its provision". Do these words
    refer to the actual expense incurred by the school in providing the
    benefit or do they refer to the hypothetical expense incurred by
    the school arrived at by the formula of dividing the total cost of
    running the school by the number of pupils attending it or to put
    it more shortly do they refer to the additional or the average cost
    of the provision of the benefit.

    I concede at once, the language is ambiguous and I see the
    strength of the linguistic argument in favour of the average cost
    construction. Nevertheless I could not believe that Parliament
    intended such a construction because it will produce what I regard
    as such unfair and absurd results.

    If what I will call the hypothetical cost test is adopted it
    will come very close to a market value test. In the case of
    independent schools which for the most part are not run as
    independent profit making institutions and which set the fees to
    raise enough money to cover the cost of running the school, the
    test is virtually indistinguishable from a market value test. In the
    case of passenger transport undertakings such as railways and
    airlines which allow free travel to employees the test would
    provide mind boggling difficulties of calculation and when the
    undertaking was running at a loss would result in a charge to tax
    that exceeded the fare charged to the general public; this would
    also be the case where school fees were heavily subsidised by
    endowments. I could not believe that this was the intention of
    Parliament. Nor could I believe that it was the intention to bring
    in at a single stroke a charge to tax that would be calculated to
    interrupt the education and expectations of so many parents and
    children, for it is surely common knowledge that the provision of
    free or subsidised education for the children of those teaching in
    independent schools was part of their usual terms of employment
    and that the salaries paid would be wholly insufficient to meet a
    charge to tax based on the full fees of the school. By the same
    token, bearing in mind that the salary level at which the tax bit
    was £5,000 a year, it will put the travel facilities attached to
    their employment out of the reach of many airline and rail
    employees. Probably the most universally provided "perk" is the
    company car. Parliament has introduced taxation of this "perk"
    but upon a gradually increasing scale - still short of the true value
    of the use of the car - no doubt because to have introduced it at
    its full value would have been seen as an unfair and unacceptable
    increase in the burden of taxation in one year on those who
    enjoyed the perk and of course the future of the British motor
    industry would be taken into account. It is against this
    background that I approached the construction and which led me to
    prefer the interpretation which bases the assessment to tax upon
    the actual cost to the employer rather than the hypothetical cost
    arrived at by dividing the number of pupils into the total cost of
    providing full facilities.

    I should make it clear that my construction did not depend
    upon the children of the staff taking up surplus places in the sense

    - 7 -

    that if there were sufficient fee paying pupils, the staff's children
    would not be given a place. The crucial question, as I see it, is
    whether accepting the staff children involved the school in extra
    expenditure. Absorbing the few staff children only involves the
    school in small extra costs such as food and laundry. All the
    main facilities of the school such as staff, buildings, playing fields
    and so forth are already provided for the fee paying pupils and no
    additional expenditure is incurred in respect of these costs by
    accepting a few children of the staff. This, as I understand it, is
    now the construction accepted by the majority of your Lordships in
    the light of the Parliamentary history.

    On this question of construction I was in a judicial minority
    of one at the end of the first hearing of this appeal. It was as a
    result of the discovery that the Parliamentary history of the
    legislation gave conclusive support to the construction I preferred
    that your Lordships agreed that the matter should be reargued to
    determine whether it was permissible to use the Parliamentary
    history as an aid to the interpretation of the legislation. In my
    view this case provides a dramatic vindication of the decision to
    consult Hansard; had your Lordships not agreed to do so the
    result would have been to place a very heavy burden of taxation
    upon a large number of persons which Parliament never intended
    to impose.

    I agree that this appeal should be allowed.

    LORD ACKNER

    My Lords,

    I entirely agree that for the reasons set out in the speech
    of my noble and learned friend Lord Browne-Wilkinson, which I
    have had the advantage of reading in draft, this appeal should be
    allowed.

    LORD OLIVER OF AYLMERTON

    My Lords,

    I have had the advantage of reading in draft the speech
    prepared by my noble and learned friend, Lord Browne-Wilkinson.
    I agree with it in its entirety and would, in the ordinary way, be
    content to do no more than express my concurrence both in the
    reasoning and in the result. I venture to add a few observations
    of my own only because I have to confess to having been a
    somewhat reluctant covert to the notion that the words which
    Parliament has chosen to use in a statute for the expression of its
    will may fall to be construed or modified by reference to what
    individual members of Parliament may have said in the course of
    debate or discussion preceding the passage of the Bill of law. A
    statute is, after all, the formal and complete intimation to the
    citizen of a particular rule of the law which he is enjoined,

    - 8 -

    sometimes under penalty, to obey and by which he is both
    expected and entitled to regulate his conduct. We must,
    therefore, I believe, be very cautious in opening the door to the
    reception of material not readily or ordinarily accessible to the
    citizen whose rights and duties are to be affected by the words in
    which the legislature has elected to express its will.

    But experience shows that language - and, particularly,
    language adopted or concurred in under the pressure of a tight
    Parliamentary time-table - is not always a reliable vehicle for the
    complete or accurate translation of legislative intention; and I
    have been persuaded, for the reasons so cogently deployed in the
    speech of my noble and learned friend, that the circumstances of
    this case demonstrate that there is both the room and the
    necessity for a limited relaxation of the previously well-settled
    rule which excludes reference to Parliamentary history as an aid
    to statutory construction.

    It is, however, important to stress the limits within which
    such a relaxation is permissible and which are set out in the
    speech of my noble and learned friend. It can apply only where
    the expression of the legislative intention is genuinely ambiguous
    or obscure or where a literal or prima facie construction leads to
    a manifest absurdity and where the difficulty can be resolved by a
    clear statement directed to the matter in issue. Ingenuity can
    sometimes suggest ambiguity or obscurity where none exists in
    fact, and if the instant case were to be thought to justify the
    exercise of combing through reports of Parliamentary proceedings
    in the hope of unearthing some perhaps incautious expression of
    opinion in support of an improbable secondary meaning, the
    relaxation of the rule might indeed lead to the fruitless expense
    and labour which has been prayed in aid in the past as one of the
    reasons justifying its maintenance. But so long as the three
    conditions expressed in the speech of my noble and learned friend
    are understood and observed, I do not, for my part, consider that
    the relaxation of the rule which he has proposed will lead to any
    significant increase in the cost of litigation or in the burden of
    research required to be undertaken by legal advisers.

    So far as the merits of the instant appeal are concerned, I,
    like my noble and learned friend Lord Bridge of Harwich and Lord
    Browne-Wilkinson, was in favour of dismissing the appeal at the
    conclusion of the first hearing. Were it not for the material in
    the reports of Hansard to which your Lordships have been referred,
    I too would still be of the that view, for although I recognise that
    in popular parlance with provision to one individual of a service
    which is, in any event, being provided for reward to many others
    may be said to cost the provider little or nothing, "cost" in
    accountancy terms is merely a computation of outgoing expenditure
    without reference to receipts. Where, however, the cost of
    providing a service is balanced or overtopped by amounts received
    for the service from others to whom it is provided, the man in
    the street might well, and probably would, say that the provider
    had incurred no expense in providing the particular benefit under
    consideration. Certainly he incurs no additional cost or expense.
    I accept, therefore, that, in referring to the "the cost of the
    benefit" and the "expense incurred in its provision", subsections (1)
    and (2) of section 63 of the Finance Act 1976 introduced an
    element of ambiguity. That is underlined by the absurdity which

    - 9 -

    would result from a literal construction of the word "cost" in the
    case of a loss-making concern such as British Rail or a heavily
    endowed institution, where the employee's benefit would have to
    be valued at a figure in excess - indeed, it may be many times in
    excess - of the market price of the service provided. The
    references to Hansard which are set out in the speech of my noble
    and learned friend, Lord Browne-Wilkinson, put it beyond doubt
    that that could not have been the intention of Parliament in
    enacting the section.

    Accordingly, I too would allow the appeal. I would add only
    that I find myself quite unable to see how referring to the reports
    of Parliamentary debates in order to determine the meaning of the
    words which Parliament has employed could possibly be construed
    as "questioning" or "impeaching" the freedom of speech or debate
    or proceedings in Parliament or as otherwise infringing the
    provisions of Article 9 of the Bill of Rights.

    LORD BROWNE-WILKINSON

    My Lords,

    The underlying subject matter of these tax appeals is the
    correct basis for valuing benefits in kind received by the taxpayers
    who are schoolmasters. However in the circumstances which I will
    relate, the appeals have also raised two questions of much wider
    importance. The first is whether in construing ambiguous or
    obscure statutory provisions your Lordships should relax the historic
    rule that the courts must not look at the Parliamentary history of
    legislation or Hansard for the purpose of construing such
    legislation. The second is whether, if reference to such materials
    would otherwise be appropriate, it would contravene article 9 of
    the Bill of Rights 1689 (1 W. & M. sess. 2, c. 2) or Parliamentary
    privilege so to do.

    The facts are fully set out in the judgments of Vinelott J.
    at first instance [1990] 1 W.L.R. 204 and of the Court of Appeal
    [1991] Ch. 203. Shortly stated, the taxpayers are nine masters and
    the bursar employed by Malvern College ("the school"). For many
    years the school has run a concessionary scheme under which
    members of the staff are entitled to have their children educated
    at the school on payment of only one-fifth of the sum charged to
    members of the public. In the relevant tax years, 1983-84, 1984-
    85 and 1985-86, children of one or more of the taxpayers were
    educated at the school on payment of the concessionary fees only.
    It is common ground that the concessionary fees more than
    covered the additional cost to the school of educating the
    taxpayers' children.

    The school had a capacity to accept 625 boys but in the
    relevant years the school was not full to capacity. The admission
    of the taxpayers' children to the school therefore did not involve
    the school in losing full fees which would otherwise have been paid
    by members of the public for the places which the taxpayers'
    children occupied.

    - 10 -

    It is common ground that the education of the children at
    reduced fees was a taxable benefit under section 61(1) of the
    Finance Act 1976 which provides:

    "[Subject to section 63(A)(b)] where in any year a person is
    employed in director's or higher-paid employment and - (a)
    by reason of his employment there is provided for him, or
    for others being members of his family or household, any
    benefit to which this section applies; and (b) the cost of
    providing the benefit is not (apart from this section)
    chargeable to tax as his income,

    there is to be treated as emoluments of the employment,
    and accordingly chargeable to income tax under Schedule E,
    an amount equal to whatever is the cash equivalent of the
    benefit."

    The crucial question relates to the amount which is to be treated
    as an emolument, i.e. what is "the cash equivalent of the benefit."
    These words are defined by section 63(1) and (2) as follows:

    "(1) The cash equivalent of any benefit chargeable to tax
    under section 61 above is an amount equal to the cost of
    the benefit, less so much (if any) of it as is made good by
    the employee to those providing the benefit.

    (2) Subject to the following subsections, the cost of a
    benefit is the amount of any expense incurred in or in
    connection with its provision, and (here and in those
    subsections) includes a proper proportion of any expense
    relating partly to the benefit and partly to other matters."

    The taxpayers contend that the only expense incurred by the
    school "in or in connection" with the education of their children is
    the additional, or marginal, cost to the school. The school was, in
    any event, up and running so as to provide its educational
    facilities for 625 boys. All the costs of running the school (staff
    salaries, provision of buildings and grounds etc.) would have had to
    be incurred in any event: the admission of the taxpayers' children
    did not increase these basic expenses in any way. The only
    expense attributable to the education of the taxpayers' children
    (additional food, laundry, stationery etc.) was fully covered by the
    one-fifth concessionary fee paid by the taxpayers. Therefore "the
    cash equivalent of the benefit" is nil.

    The Revenue on the other hand contend that the "expense
    incurred in or in connection with" the provision of education for
    the children of the taxpayers was exactly the same as the expense
    incurred in or in connection with the education of all other pupils
    at the school and accordingly the expense of educating any one
    child is a proportionate part of the cost of running the whole
    school.

    These provisions regulate the taxation of all benefits in
    kind. As Nicholls L.J. pointed out in the Court of Appeal, for
    present purposes such benefits can be of two kinds. First, the
    benefit may be of a kind bought in from outside the employer's
    business, such as a car or medical insurance ("external benefits").
    Second, the benefit may consist of the enjoyment by the employee

    - 11 -

    of services or facilities which it is part of the employer's business
    to sell to the public, for example concessionary travel for railway
    or airline employees or concessionary education for the children of
    schoolteachers ("in-house benefits"). In both cases the benefit falls
    to be quantified by reference to the expense of providing the
    benefit. In the case of external benefits this does not normally
    raise any major problems because such cost is an isolated
    expenditure. But in the case of in-house benefits there is an
    obvious problem, since the employer is, for the purpose of selling
    the facility to the public, incurring the cost of running the train,
    airline or school the use of which is provided on a concessionary
    basis to the employee. What then is the cost to the employer of
    providing the in-house benefit for the employee? Is it only the
    additional or marginal cost to the employer providing the service
    for the employee, or is it a proportionate part of the total costs
    incurred by the employer in providing the facility to be used both
    by the public and by the employee?

    The special commissioner held in favour of the taxpayers.
    That decision was reversed by Vinelott J. [1990] 1 W.L.R. 204,
    whose decision was affirmed by the Court of Appeal [1991] Ch.
    203. The taxpayers appeal to your Lordships' House.

    The case was originally argued before your Lordships without
    reference to any Parliamentary proceedings. After the conclusion
    of the first hearing, it came to your Lordships' attention that an
    examination of the proceedings in Parliament in 1976 which lead
    to the enactment of sections 61 and 63 might give a clear
    indication which of the two rival contentions represented the
    intention of Parliament in using the statutory words. Your
    Lordships then invited the parties to consider whether they wished
    to present further argument on the question whether it was
    appropriate for the House (under Practice Statement (Judicial
    Precedent) [1966] 1 W.L.R. 1234) to depart from previous authority
    of this House which forbids reference to such material in
    construing statutory provisions and, if so, what guidance such
    material provided in deciding the present appeal. The taxpayers
    indicated that they wished to present further argument on these
    points. The case was listed for rehearing before a committee of
    seven members not all of whom sat on the original committee.

    At the start of the further hearing, the Attorney-General,
    who appeared for the Crown, drew our attention to a letter
    addressed to him by the Clerk of the House of Commons
    suggesting that any reference to Hansard for the purpose of
    construing the Act might breach the privileges of that House.
    Until 31 October 1980, the House of Commons took the view that
    any reference to Hansard in court proceedings would constitute a
    breach of its privileges and required a petition for leave to use
    Hansard to be presented in each case. On 31 October 1980 the
    House of Commons resolved as follows:

    "That this House, while re-affirming the status of
    proceedings in Parliament confirmed by article 9 of the Bill
    of Rights, gives leave for reference to be made in future
    court proceedings to the Official Report of Debates and to
    the published Reports and evidence of Committees in any
    case in which, under the practice of the House, it is
    required that a petition for leave should be presented and

    - 12 -

    that the practice of presenting petitions for leave to refer
    to Parliamentary papers be discontinued."

    The letter of 5 June 1992 from the Clerk of the House of
    Commons starts by saying, "My attention has been drawn to the
    fact that the House of Lords may be asked to hear argument in
    this case based on the meaning or significance of words spoken
    during proceedings on a Bill in the House of Commons". The
    letter then sets out the text of the resolution of 31 October 1980,
    and continues:

    "In my opinion, the use proposed for the Official Report of
    Debates in this case is beyond the meaning of the
    "reference" contemplated in the Resolution of October 1980.
    If a court were minded in particular circumstances to
    permit the questioning of the proceedings of the House in
    the way proposed, it would be proper for the leave of the
    House to be sought first by way of petition so that, if leave
    were granted, no question would arise of the House
    regarding its Privileges as having been breached."

    The reference in that letter to "questioning" the proceedings
    of the House of Commons plainly raised the issue whether the
    proposed use of Parliamentary materials without the leave of the
    House of Commons would breach article 9 of the Bill of Rights,
    1689 which provides:


    "That the freedome of speech and debates or proceedings in
    Parlyament ought not to be impeached or questioned in any
    court or place out of Parlyament."

    The Attorney-General, while submitting that such use of
    Parliamentary material would breach article 9, accepted that it
    was for the courts to determine the legal meaning and effect of
    article 9. However, the Attorney-General warned your Lordships
    that, even if reference in this case to Parliamentary materials did
    not infringe article 9, the House of Commons might take the view
    the House enjoyed some wider privilege which we would be
    infringing and might well regret that its views on the point had
    not been sought before a decision was reached by your Lordships.
    Whilst strictly maintaining the privileges of the House of
    Commons, the Attorney-General used the Parliamentary materials
    in this case as an illustration of the dangers of so doing.
    Moreover, in order to assist us, whilst still maintaining the
    privileges of the House of Commons, he made submissions as to
    the effect of such material on the construction of section 63 if,
    contrary to his contentions and advice, we decided this appeal with
    the assistance of such material.

    In the result, the following issues arise:

    1. Should the existing rule prohibiting any reference to
      Hansard in construing legislation be relaxed and, if so,
      to what extent?

    2. If so, does this case fall within the category of cases
      where reference to Parliamentary proceedings should
      be permitted.

    - 13 -

    1. If reference to Parliamentary proceedings is
      permissible, what is the true construction of the
      statutory provisions?

    2. If reference to the Parliamentary proceedings is not
      permissible, what is the true construction of the
      statutory provisions?

    3. If the outcome of this case depends upon whether or
      not reference is made to Hansard, how should the
      matter proceed in the face of the warnings of the
      Attorney-General that such references might
      constitute a breach of parliamentary privilege?

    I will consider these issues in turn, but first I must set out
    the Parliamentary history of sections 61 and 63 by reference to
    which the case was argued before us.

    The Parliamentary Material

    For reasons which will appear it is necessary first to refer
    to the legislation affecting the taxation of benefits in kind before
    1975. Under the Finance Act 1948, section 39(1), directors and
    employees of bodies corporate earning more than £2000 per annum
    were taxed under Schedule E on certain benefits in kind. The
    amount charged was the expense incurred by the body corporate
    "in or in connection with the provision" of the benefit in kind. By
    section 39(6) it was provided that references to expenses "incurred
    in or in connection with any matter includes a reference to a
    proper proportion of any expense incurred partly in or in
    connection with that matter". Employment by a school or
    charitable organisation was expressly excluded from the charge:
    sections 41(5) and 44. These provisions were re-enacted in the
    Income and Corporation Taxes Act, 1970.

    Those provisions covered in-house benefits as well as
    external benefits. We were told that after 1948 the Revenue
    sought to tax at least two categories of employees in receipt of
    in-house benefits. Higher paid employees of the railways enjoy
    free or concessionary travel on the railways. The Revenue
    reached an agreement that such employees should be taxed on 20
    per cent (later 25 per cent) of the full fare. Airline employees
    also enjoy concessionary travel. We were told that in the 1960s
    the Revenue sought to tax such employees on that benefit on the
    basis of the average cost to the airline of providing a seat, not
    merely on the marginal cost. The Tax Commissioners rejected
    such claim: the Revenue did not appeal. Therefore in practice
    from 1948 to 1975 the Revenue did not seek to extract tax on the
    basis of the average cost to the employer of providing in-house
    benefits.

    In 1975 the Government proposed a new tax on vouchers
    provided by an employer to his employees which could be
    exchanged for goods or services. Clause 33(1) of the Finance (No
    2) Bill 1975 provided that the employee was to be treated, on
    receipt of a voucher, as having received an emolument from his
    employment of an amount "equal to the expense incurred by the
    person providing the voucher in or in connection with the provision
    of the voucher and the money, goods or services for which it is

    - 14 -

    capable of being exchanged". The statutory wording of the Bill
    was therefore similar to that in the Act of 1948 and in section
    63(2) of the Finance Act 1976. In the Standing Committee on the
    Bill, the Financial Secretary was asked about the impact of the
    clause on railwaymen. He gave the following answer:

    "Similarly, the railwayman travelling on his normal voucher
    will not be taxable either. The clause deals with the
    situation where a number of firms produce incentives of
    various kinds. In one or two instances, there is likely to be
    some liability concerning rail vouchers of a special kind, but
    in general, the position is as I have said, they will not be
    taxable."

    He was then asked to explain why they would not be
    taxable and replied:

    "Perhaps I can make clear why there is no taxable benefit
    in kind, because the provision of the service that he
    provides falls upon the employer. Clearly, the railways will
    run in precisely the same way whether the railwaymen use
    this facility or not, so there is no extra charge to the
    Railways Board itself therefore there would be no taxable
    benefits."

    Later he explained that by the words "no extra charge" he
    meant "no extra cost". Clause 33(1) of the Bill was enacted as
    section 36(1) of the Finance (No 2) Act, 1975.

    The Finance Bill 1976, sought to make a general revision of
    the taxation of benefits in kind. The existing legislation on fringe
    benefits was to be repealed. Clause 52 of the Bill as introduced
    eventually became section 61 of the Act of 1976 and imposed a
    charge to tax on benefits in kind for higher paid employees i.e.
    those paid more than £5000 per annum. Clause 54 of the Bill
    eventually became section 63 of the Act of 1976. As introduced,
    clause 54(1) provided that the cash equivalent of any benefit was
    to be an amount equal to "the cost of the benefit". Clause 54(2)
    provided that, except as provided in later subsections "the cost of
    a benefit is the amount of any expense incurred in or in
    connection with its provision". Crucially, clause 54(4) of the Bill
    sought to tax in-house benefits on a different basis from that
    applicable to external benefits. It provided that the cost of a
    benefit consisting of the provision of any service or facility which
    was also provided to the public (i.e. in-house benefits) should be
    the price which the public paid for such facility or service.
    Employees of schools were not excluded from the new charge.

    Thus if the 1976 Bill had gone through as introduced,
    railway and airline employees would have been treated as receiving
    benefits in kind from concessionary travel equal to the open
    market cost of tickets and schoolmasters would have been taxed
    for concessionary education on the amount of the normal school
    fees.

    After second reading, clause 52 of the Bill was committed
    to a committee of the whole House and clause 54 to Standing
    Committee E. On 17 May 1976, the House considered clause 52
    and strong representations were made about the impact of clause

    - 15 -

    52 on airline and railway employees. At the start of the meeting
    of Standing Committee E on 17 June 1976 (before clause 54 was
    being discussed) the Financial Secretary to the Treasury, Mr.
    Robert Sheldon, made an announcement (columns 893-895) in the
    following terms:

    "The next point I wish to make concerns services and deals
    with the position of employees of organisations, bodies, or
    firms which provide services, where the employee is in
    receipt of those services free or at a reduced rate. Under
    clause 54(4) the taxable benefit is to be based on the arm's
    length price of the benefit received. At present the benefit
    is valued on the cost to the employer. Representations
    have been made concerning airline travel and railway
    employees. ... it was never intended that the benefit
    received by the airline employee would be the fare paid by
    the ordinary passenger. The benefit to him would never be
    as high as that, because of certain disadvantages that the
    employee has. Similar considerations, although of a
    different kind, apply to railway employees.

    I have had many interviews, discussions and meetings on this
    matter and I have decided to withdraw clause 54(4). I
    thought I would mention this at the outset because so many
    details, which would normally be left until we reached that
    particular stage, will be discussed with earlier parts of the
    legislation. I shall give some reasons which weigh heavily in
    favour of the withdrawal of this provision.

    The first is the large difference between the cost of
    providing some services and the amount of benefit which
    under the Bill would be held to be received. There are a
    number of cases of this kind, and I would point out that air
    and rail journeys are only two of a number of service
    benefits which have a number of problems attached to them.
    But there is a large difference between the cost of the
    benefit to the employer and the value of that benefit as
    assessed. It could lead to unjustifiable situations resulting
    in a great number of injustices and I do not think we should
    continue with it.

    . . .

    The second reason for withdrawing clause 54(4) is that these
    services would tend to be much less used. The problem
    would then arise for those who had advocated the
    continuation of this legislation that neither the employer
    nor the employee nor the Revenue would benefit from the
    lesser use of these services. This factor also weighed with
    me.

    The third reason is the difficulty of enforcement and
    administration which both give rise to certain problems.

    Finally, it was possible to withdraw this part of the
    legislation as the services cover not only a more difficult
    area, but a quite distinct area of these provisions, without
    having repercussions on some of the other areas. . . .

    - 16 -

    A Member: I, too, have talked to many airline employees
    about this matter, and I am not completely clear as to the
    purport of my Hon Friend's remarks. Is he saying that
    these benfits will remain taxable but that the equivalent
    cost of the benefit will be calculated on some different
    basis? Or is he saying that these benefits will not be
    taxable at all?

    Financial Secretary: The existing law which applies to the
    taxation of some of these benefits will be retained. The
    position will subsequently be unchanged from what it is now
    before the introduction of this legislation."

    The Financial Secretary was then asked to elucidate the
    impact of this on airline employees. At column 930 he is reported
    as saying:

    "There is a difference between the provision of services to
    an employee earning less than £5000 and an employee
    earning more than £5000, or one who is a director. The
    position is quite clear. What we are withdrawing is the
    arm's-length valuation of benefit under clause 54(4) where
    an employer is providing services to the employee at a cost
    which may be very little. The employee earning more than
    £5000 or the director will be assessed on the benefit
    received by him on the basis of the cost to the employer
    rather than the price that would generally be charged to the
    public. That is the position that we have now brought in,
    as opposed to the original one in the Bill where it would be
    assessed on the cost to a member of the public. That
    position now is the same as it stands before this legislation
    is passed."

    After being further pressed, the Financial Secretary, at
    column 931, said:

    "The position is as I have enunciated it. If a company
    provides a service to the kind of employee which we have
    been talking about, and the company subsidises that service,
    the benefit assessable on the employee is the cost to the
    employer of providing that service. This was to have been
    changed by clause 54(4) under which the benefit received
    was to be assessed at the arm's length price which an
    ordinary member of the public would have paid for that
    service. Some companies provide services of a kind where
    the cost to them is very little. For example, an airline
    ticket, allowing occupation of an empty seat, costs an
    airline nothing - in fact in such a case there could be a
    negative cost, as it might be an advantage to the airline to
    have an experienced crew member on the flight. The cost
    to the company, then, would be nothing, but the benefit
    assessable under clause 54(4) could be considerable. We are
    reverting to the existing practice.

    He further said:

    "If the company provides services to such people at a
    subsidised rate, the employee will be assessed on the benefit

    - 17 -


    received on the basis of the cost to the employer. That is
    the position as it was before this Bill and as it will be if
    the whole of the Bill is passed, because subsection (2) only
    restates the existing position. It does not produce anything
    new (column 931)."

    Simultaneously with the announcement to the Standing
    Committee, a Press release was issued announcing the withdrawal
    of clause 54(4). It referred to the same matters as the Financial
    Secretary had stated to the Committee and concluded:

    "The effect of deleting this subclause will be to continue
    the present basis of taxation of services, namely the cost to
    the employer of providing the service."

    The point was further debated in committee on 22 June
    1976. A Member is reported as saying (column 1013) that "like
    many others, I welcome the concession that has been made to
    leave out the airline staff and the railway employees and all the
    others that are left out by the dropping of clause 54(4)". Another
    Member, after referring to the particular reference in the
    Financial Secretary's statement to airline and railway employees,
    asked whether the same distinction applied to services provided by
    hotel companies to their employees - that is, to rooms which are
    freely available for the general public in hotels being offered at a
    concessionary rate to employees of the hotel group. In response,
    the Financial Secretary said of the position of such employees:

    "The position is, as he probably expected, the same as that
    which, following my announcement last week about the
    withdrawal of clause 54(4), applies to other employees in
    service industries; the benefit is the cost to the employer.
    It is a good illustration of one of the reasons why I
    withdrew this subsection, in that the cost to the employer
    in this instance could be much less than the arm's-length
    cost to the outside person taking advantage of such a
    service (column 1024)."

    The question of the taxation of merchant seamen in respect
    of travel concessions to their families on their employers' ships
    was raised by another speaker and an amendment (No 299) was
    tabled to meet their position. The Financial Secretary (at column
    1100) said:

    "Perhaps I may discuss a closely allied problem under
    Amendment No 299, to which a number of hon. Gentlemen
    spoke. This proposal concerns the employee of a company
    and his wife, or the spouse, and the concession of a free
    passage or voyage in a company ship "once in each calendar
    year" according to the amendment. I think that I can
    satisfy the hon. Gentlemen that these voyages will not now
    be subject to tax as a result of the withdrawal of
    subsection (4) apart from the nominal charge for food which
    is normally made and which would be assessable. The
    current position more than meets the amendment. As I
    understand the matter, there could be a fair number of such
    voyages, but the only basis for charge would be on the cost
    to the employer, and in the example that we are considering
    that would be very small."

    - 18 -

    The very question which is the subject matter of the
    present appeal was also raised. A Member (at column 1091) said:

    "I should be grateful for the Financial Secretary's guidance
    on these two points. . . . The second matter applies
    particularly to private sector, fee-paying schools where, as
    the Financial Secretary knows, there is often an
    arrangement for the children of staff in these schools to be
    taught at less than the commercial fee at other schools. I
    take it that because of the deletion of clause 54(4) that is
    not now caught. Perhaps these examples will help to clarify
    the extent to which the Government amendment goes."

    The Financial Secretary responded to this question as
    follows:

    "He mentioned the children of teachers. The removal of
    clause 54(4) will affect the position of a child of one of the
    teachers at the child's school, because now the benefit will
    be assessed on the cost to the employer, which would be
    very small indeed in this case (column 1095)."

    Thereafter, clause 54 was not the subject of further debate
    and passed into law as it now stands as section 63 of the Act.

    The position can therefore be summarised as follows. The
    Bill as introduced sought by clause 54(4) to tax in-house benefits
    on a different basis from other benefits i.e. not on the cost of the
    in-house benefit to the employer but on the open market price
    charged to the public. On the deletion of clause 54(4), in-house
    benefits were to be taxed on the same basis as external benefits
    i.e. on the cost to the employer of providing the benefit.
    Numerous inquiries were made of the Financial Secretary to
    elucidate the resulting effect of the Bill on in-house benefits i.e.
    concessionary travel for airline, railway and merchant navy
    employees, on benefits for hotel employees and on concessionary
    education for the children of teachers. In responding to each of
    these requests for information (save that relating to teachers), the
    Financial Secretary stated that the effect of the Bill would be to
    leave their position unchanged from the previous law. He
    explained that in each case (including that of teachers) the charge
    would be on the cost to the employer of providing the services
    and that in each case that cost would either be nil or very small.
    After these statements were made by the Financial Secretary the
    Bill passed into law without further discussion on this aspect of
    the matter.

    Against that background I turn to consider the various issues
    which I have identified.

    1. Should the rule prohibiting references to Parliamentary
    material be relaxed?

    Under present law, there is a general rule that references
    to Parliamentary material as an aid to statutory construction is
    not permissible ("the exclusionary rule"): Davis v. Johnson [1979]
    A.C. 264; Hadmor Productions Ltd v. Hamilton [1983] A.C. 191.
    This rule did not always apply but was judge made. Thus, in Ash
    v. Abdy
    (1678) 3 Swans. 663 Lord Nottingham took judicial notice

    - 19 -

    of his own experience when introducing the Bill in the House of
    Lords. The exclusionary rule was probably first stated by Willes J.
    in Millar v. Taylor (1769) 4 Burr. 2303, 2332. However, the case
    of In re Mew and Thome (1862) 31 L.J. Bank. 87 shows that even
    in the middle of the last century the rule was not absolute: in
    that case Lord Westbury L.C. in construing an Act had regard to
    its Parliamentary history and drew an inference as to Parliament's
    intention in passing the legislation from the making of an
    amendment striking out certain words.

    The exclusionary rule was later extended so as to prohibit
    the court from looking even at reports made by commissioners on
    which legislation was based: Salkeld v. Johnson (1848) 2 Exch.
    256, 273. This rule has now been relaxed so as to permit reports
    of commissioners, including law commissioners, and white papers to
    be looked at for the purpose solely of ascertaining the mischief
    which the statute is intended to cure but not for the purpose of
    discovering the meaning of the words used by Parliament to effect
    such cure: Eastman Photographic Materials Co v. Comptroller-
    General of Patents, Designs and Trade-marks
    [1898] A.C.571;
    Assam Railways and Trading Co Ltd v. Commissioners of Inland
    Revenue
    [1935] A.C. 445 457-458. Indeed, in Reg. v. The
    Secretary of State for Transport, Ex parte Factortame Ltd.
    [1990]
    2 A.C. 85 your Lordships' House went further than this and had
    regard to a Law Commission report not only for the purpose of
    ascertaining the mischief but also for the purpose of drawing an
    inference as to Parliamentary intention from the fact that
    Parliament had not expressly implemented one of the Law
    Commission's recommendations.

    Although the courts' attitude to reports leading to
    legislation has varied, until recently there was no modern case in
    which the court had looked at parliamentary debates as an aid to
    construction. However, in Pickstone v. Freemans Plc [1989] A.C.
    66 this House, in construing a statutory instrument, did have
    regard to what was said by the Minister who initiated the debate
    on the regulations. My noble and learned friend Lord Keith of
    Kinkel (at p. 112B) after pointing out that the draft Regulations
    were not capable of being amended when presented to Parliament,
    said that it was "entirely legitimate for the purpose of
    ascertaining the intention of Parliament to take into account the
    terms in which the draft was presented by the responsible Minister
    and which formed the basis of its acceptance." My noble and
    learned friend Lord Templeman (at pp. 121-122) also referred to
    the Minister's speech, although possibly only by way of support for
    a conclusion he had reached on other grounds. My noble and
    learned friends Lord Brandon of Oakbrook and Lord Jauncey of
    Tullichettle agreed with both those speeches. This case therefore
    represents a major inroad on the exclusionary rule: see also Owen
    Bank Ltd, v. Bracco
    [1992] 2 W.L.R. 621.

    Mr Lester, for the taxpayers, did not urge us to abandon
    the exclusionary rule completely. His submission was that where
    the words of a statute were ambiguous or obscure or were capable
    of giving rise to an absurd conclusion it should be legitimate to
    look at the Parliamentary history, including the debates in
    Parliament, for the purpose of identifying the intention of
    Parliament in using the words it did use. He accepted that the
    function of the court was to construe the actual words enacted by

    - 20 -

    Parliament so that in no circumstances could the court attach to
    words a meaning that they were incapable of bearing. He further
    accepted that the court should only attach importance to clear
    statements showing the intention of the promoter of the Bill,
    whether a Minister or private member: there could be no dredging
    through conflicting statements of intention with a view to
    discovering the true intention of Parliament in using the statutory
    words.

    In Beswick v. Beswick [1968] A.C. 58, 74A Lord Reid said:

    "For purely practical reasons we do not permit debates in
    either House to be cited: it would add greatly to the time
    and expense involved in preparing cases involving the
    construction of a statute if counsel were expected to read
    all the debates in Hansard, and it would often be
    impracticable for counsel to get access to at least the older
    reports of debates in Select Committees of the House of
    Commons; moreover, in a very large proportion of cases
    such a search, even if practicable, would throw no light on
    the question before the court."

    In Black-Clawson International Ltd v. Papierwerke Aldhof-
    Aschaffenburg A.G.
    [1973] A.C. 591 Lord Reid said (at pp. 613-
    615):

    "We often say that we are looking for the intention of
    Parliament, but that is not quite accurate. We are seeking
    the meaning of the words which Parliament used. We are
    seeking not what Parliament meant but the true meaning of
    what they said ... I have more than once drawn attention
    to the practicial difficulties . . . but the difficulty goes
    deeper. Questions which give rise to debate are rarely
    those which later have to be decided by the courts. One
    might take the views of the promoters of a Bill as an
    indication of the intention of Parliament but any view the
    promoters may have about the questions which later come
    before the court will not often appear in Hansard and often
    those questions have never occurred to the promoters. At
    best we might get material from which a more or less
    dubious inference might be drawn as to what the promoters
    intended or would have intended if they had thought about
    the matter, and it would, I think, generally be dangerous to
    attach weight to what some other members of either House
    may have said ... in my view, our best course is to
    adhere to present practice."

    In the same case Lord Wilberforce said, at p. 629F-H):

    "The second [reason] is one of constitutional principle.
    Legislation in England is passed by Parliament and put in
    the form of written words. This legislation is given legal
    effect upon subjects by virtue of judicial decision, and it is
    the function of the courts to say what the application of
    the words used to particular cases or individuals is to be . .
    . It would be a degradation of that process if the courts
    were to be merely a reflecting mirror of what some other
    interpretation agency might say."

    - 21 -

    In Fothergill v. Monarch Airlines [1981] A.C. 251, 279 Lord
    Diplock said:

    "The constitutional function performed by courts of justice
    as interpreters of the written law laid down in Acts of Parliament
    is often described as ascertaining "the intention of Parliament";
    but what this metaphor, though convenient, omits to take into
    account is that the court, when acting in its interpretative role, as
    well as when it is engaged in reviewing the legality of
    administrative action, is doing so as mediator between the state in
    the exercise of its legislative power and the private citizen for
    whom the law made by Parliament constitutes a rule binding upon
    him and enforceable by the executive power of the state.
    Elementary justice or ... the need for legal certainty demands
    that the rules by which the citizen is to be bound should be
    ascertainable by him (or, more realistically, by a competent lawyer
    advising him) by reference to identifiable sources that are
    pubiically accessible."

    In Davis v. Johnson [1979] A.C. 264, 350A Lord Scarman
    said:

    "Such material is an unreliable guide to the meaning of
    what is enacted, it promotes confusion, not clarity. The cut
    and thrust of debate and the pressures of executive
    responsibility, the essential features of open and responsible
    government, are not always conducive to a clear and
    unbiased explanation of the meaning of statutory language.
    The volume of parliamentary and ministerial utterances can
    confuse by its very size."

    Thus the reasons put forward for the present rule are first,
    that it preserves the constitutional proprieties leaving Parliament
    to legislate in words and the courts (not Parliamentary speakers),
    to construe the meaning of the words finally enacted; second, the
    practical difficulty of the expense of researching Parliamentary
    material which would arise if the material could be looked at;
    third, the need for the citizen to have access to a known defined
    text which regulates his legal rights; fourth, the improbability of
    finding helpful guidance from Hansard.

    The Law Commissions of England and Scotland in their joint
    Report on the Interpretation of Statutes in 1969 ((1969) No. 21)
    and the Renton Committee on the Preparation of Legislation
    ((1975) Cmnd 6053) both recognised that there was much to be
    said in principle for relaxing the rule but advised against a
    relaxation at present on the same practical grounds as are
    reflected in the authorities. However, both bodies recommended
    changes in the form of legislation which would, if implemented,
    have assisted the court in its search for the true Parliamentary
    intention in using the statutory words.

    Mr Lester submitted that the time has come to relax the
    rule to the extent which I have mentioned. He points out that
    the courts have departed from the old literal approach of statutory
    construction and now adopt a purposive approach, seeking to
    discover the Parliamentary intention lying behind the words used
    and construing the legislation so as to give effect to, rather than
    thwart, the intentions of Parliament. Where the words used by

    - 22 -

    Parliament are obscure or ambiguous, the Parliamentary material
    may throw considerable light not only on the mischief which the
    Act was designed to remedy but also on the purpose of the
    legislation and its anticipated effect. If there are statements by
    the Minister or other promoter of the Bill, these may throw as
    much light on the "mischief" which the Bill seeks to remedy as do
    the white papers, reports of official committees and Law
    Commission reports to which the courts already have regard for
    that purpose. If a Minister clearly states the effect of a provision
    and there is no subsequent relevant amendment to the Bill or
    withdrawal of the statement it is reasonable to assume that
    Parliament passed the Bill on the basis that the provision would
    have the effect stated. There is no logical distinction between
    the use of ministerial statements introducing subordinate legislation
    (to which recourse was had in the Pickstone case [1989] A.C. 66)
    and such statements made in relation to other statutory provisions
    which are not in fact subsequently amended. Other common law
    jurisdictions have abandoned the rule without adverse consequences.
    Although the practical reasons for the rule (difficulty in getting
    access to Parliamentary materials and the cost and delay in
    researching it) are not without substance, they can be greatly
    exaggerated: experience in Commonwealth countries which have
    abandoned the rule does not suggest that the drawbacks are
    substantial, provided that the court keeps a tight control on the
    circumstances in which references to Parliamentary material are
    allowed.

    On the other side, the Attorney-General submitted that the
    existing rule had a sound constitutional and practical basis. If
    statements by Ministers as to the intent or effect of an Act were
    allowed to prevail, this would contravene the constitutional rule
    that Parliament is "sovereign only in respect of what it expresses
    by the words used in the legislation it has passed": per Lord
    Diplock in Black-Clawson [1975] A.C. 591, 615B. It is for the
    courts alone to construe such legislation. It may be unwise to
    attach importance to ministerial explanations which are made to
    satisfy the political requirements of persuasion and debate, often
    under pressure of time and business. Moreover, in order to
    establish the significance to be attached to any particular
    statement, it is necessary both to consider and to understand the
    context in which it was made. For the courts to have regard to
    Parliamentary material might necessitate changes in Parliamentary
    procedures to ensure that ministerial statements are sufficiently
    detailed to be taken into account. In addition, there are all the
    practical difficulties as to the accessibility of Parliamentary
    material, the cost of researching it and the use of court time in
    analysing it, which are good reasons for maintaing the rule.
    Finally, to use what is said In Parliament for the purpose of
    construing legislation would be a breach of article 9 of the Bill of
    Rights as being an impeachment or questioning of the freedom of
    speech in debates in proceedings in Parliament.

    My Lords, I have come to the conclusion that, as a matter
    of law, there are sound reasons for making a limited modification
    to the existing rule (subject to strict safeguards) unless there are
    constitutional or practical reasons which outweigh them. In my
    judgment, subject to the questions of the privileges of the House
    of Commons, reference to Parliamentary material should be
    permitted as an aid to the construction of legislation which is

    -23-

    ambiguous or obscure or the literal meaning of which leads to an
    absurdity. Even in such cases references in court to Parliamentary
    material should only be permitted where such material clearly
    discloses the mischief aimed at or the legislative intention lying
    behind the ambiguous or obscure words. In the case of statements
    made in Parliament, as at present advised I cannot foresee that
    any statement other than the statement of the Minister or other
    promoter of the Bill is likely to meet these criteria.

    I accept Mr Lester's submissions, but my main reason for
    reaching this conclusion is based on principle. Statute law consists
    of the words that Parliament has enacted. It is for the courts to
    construe those words and it is the court's duty in so doing to give
    effect to the intention of Parliament in using those words. It is
    an inescapable fact that, despite all the care taken in passing
    legislation, some statutory provisions when applied to the
    circumstances under consideration in any specific case are found to
    be ambiguous. One of the reasons for such ambiguity is that the
    members of the legislature in enacting the statutory provision may
    have been told what result those words are intended to achieve.
    Faced with a given set of words which are capable of conveying
    that meaning it is not surprising if the words are accepted as
    having that meaning. Parliament never intends to enact an
    ambiguity. Contrast with that the position of the courts. The
    courts are faced simply with a set of words which are in fact
    capable of bearing two meanings. The courts are ignorant of the
    underlying Parliamentary purpose. Unless something in other parts
    of the legislation discloses such purpose, the courts are forced to
    adopt one of the two possible meanings using highly technical rules
    of construction. In many, I suspect most, cases references to
    Parliamentary materials will not throw any light on the matter.
    But in a few cases it may emerge that the very question was
    considered by Parliament in passing the legislation. Why in such a
    case should the courts blind themselves to a clear indication of
    what Parliament intended in using those words? The court cannot
    attach a meaning to words which they cannot bear, but if the
    words are capable of bearing more than one meaning why should
    not Parliament's true intention be enforced rather than thwarted?

    A number of other factors support this view. As I have
    said, the courts can now look at white papers and official reports
    for the purpose of finding the "mischief" sought to be corrected,
    although not at draft clauses or proposals for the remedying of
    such mischief. A ministerial statement made in Parliament is an
    equally authoritative source of such information: why should the
    courts be cut off from this source of information as to the
    mischief aimed at? In any event, the distinction between looking
    at reports to identify the mischief aimed at but not to find the
    intention of Parliament in enacting the legislation is highly
    artificial. Take the normal Law Commission Report which
    analyses the problem and then annexes a draft Bill to remedy it.
    It is now permissible to look at the report to find the mischief
    and at the draft Bill to see that a provision in the draft was not
    included in the legislation enacted: see Factortame [1990] 2 A.C.
    85. There can be no logical distinction between that case and
    looking at the draft Bill to see that the statute as enacted
    reproduced, often in the same words, the provision in the Law
    Commissions's draft. Given the purposive approach to construction
    now adopted by the courts in order to give effect to the true

    - 24 -

    intentions of the legislature, the fine distinctions between looking
    for the mischief and looking for the intention in using words to
    provide the remedy are technical and inappropriate. Clear and
    unambiguous statements made by Ministers in Parliament are as
    much the background to the enactment of legislation as white
    papers and Parliamentary reports.

    The decision in Pickstone [1989] A.C. 66 which authorises
    the court to look at ministerial statements made in introducing
    regulations which could not be amended by Parliament is logically
    indistinguishable from such statements made in introducing a
    statutory provision which, though capable of amendment, was not
    in fact amended.

    The judicial antipathy to relaxing the rule has been far from
    uniform. Lord Reid, who in the passage I have quoted from Black
    Clawson
    [1975] A.C. 591, 613-615 supported the maintenance of
    the rule, in his dissenting speech in Warner v. Metropolitan Police
    Commissioner
    [1969] 2 A.C. 256, 279 said:

    "The layman may well wonder why we do not consult the
    Parliamentary Debates, for we are much more likely to find
    the intention of Parliament there than anywhere else. The
    rule is firmly established that we may not look at Hansard
    and in general I agree with it for reasons which I gave last
    year in Beswick v. Beswick. This is not a suitable case in
    which to reopen the matter but I am bound to say that this
    case sems to show that there is room for an exception
    where examining the proceedings in Parliament will almost
    certainly settle the matter immediately one way or the
    other."

    Lord Wilberforce (whose words I have also quoted) had
    second thoughts in an extrajudicial capacity at a seminar in
    Canberra where he referred to a case in which the Minister on
    two occasions during the passage of a Finance Bill stated expressly
    that the provision was not intended to tax a particular class of
    beneficiary. Yet subsequently beneficiaries of that class were
    sought to be taxed under the statutory provision. Lord Wilberforce
    suggested that there should be a relaxation of the exclusionary
    rule so that where a Minister promoting a Bill makes an explicit
    and official statement as to the meaning or scope of the provision,
    reference should be allowed to that statement.

    Text books often include reference to explanations of
    legislation given by a Minister in Parliament, as a result of which
    lawyers advise their clients taking account of such statements and
    judges when construing the legislation come to know of them. In
    addition, a number of distinguished judges have admitted to
    breaching the exclusionary rule and looking at Hansard in order to
    seek the intention of Parliament. When this happens, the parties
    do not know and have no opportunity to address the judge on the
    matter. A vivid example of this occurred in Hadmor [1983] 1
    A.C. 191 where Lord Denning in the Court of Appeal relied on his
    own researches into Hansard in reaching his conclusions: in the
    House of Lords, counsel protested that there were other passages
    to which he would have wished to draw the court's attention had
    he known that Lord Denning was looking at Hansard: see Hadmor

    - 25 -

    [1983] 1 A.C. 191, 233. It cannot be right for such information to
    be available, by a sidewind, for the court but the parties be
    prevented from presenting their arguments on such material.

    Against these considerations, there have to be weighed the
    practical and constitutional matters urged by the Attorney-General
    many of which have been relied on in the past in the courts in
    upholding the exclusionary rule. I will first consider the practical
    difficulties.

    It is said that Parliamentary materials are not readily
    available to, and understandable by, the citizen and his lawyers
    who should be entitled to rely on the words of Parliament alone to
    discover his position. It is undoubtedly true that Hansard and
    particularly records of Committee debates are not widely held by
    libraries outside London and that the lack of satisfactory indexing
    of Committee stages makes it difficult to trace the passage of a
    clause after it is redrafted or renumbered. But such practical
    difficulties can easily be overstated. It is possi