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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) URL: http://www.bailii.org/uk/cases/UKHL/1992/3.html 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:
Should the existing rule
prohibiting any reference to
Hansard in construing legislation
be relaxed and, if so,
to what extent?
If so, does this case fall within
the category of cases
where reference to Parliamentary
proceedings should
be permitted.
- 13 -
If reference to
Parliamentary proceedings is
permissible, what is
the true construction of the
statutory provisions?
If reference to the
Parliamentary proceedings is not
permissible, what is
the true construction of the
statutory provisions?
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