Pepper (Inspector of Taxes) v Hart

Pepper (Inspector of Taxes) v Hart

Hart and nine others were teachers at Malvern College, where from 1983 to 1986 they took advantage of a "concessionary fee" scheme, which allowed their children to be educated at rates one-fifth of those paid by other pupils. They disputed the amount of tax they had to pay under the 1976 Finance Act,^[3] Section 63 of which said that:

The cash equivalent of any benefit chargeable to tax ... is an amount equal to the cost equivalent of the benefit, less so much (if any) of it as is made good by the employee to those providing the benefit ... 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.^[4]

The Inland Revenue, attempting to tax this benefit, argued that the "cost" of the benefit meant an average of the cost of providing it; if there were 100 pupils at a school that cost £1 million per year to run, the "cost" per pupil was £10,000. Hart and his fellow teachers disputed this and argued that it was instead marginal cost, saying that other than food, stationery, laundry and similar there was no cost to the school due to the children's presence that would not be there already.^[5] The Special Commissioners (an appellate body for income tax claims),^[6] ruling in favour of Hart, noted that not only was the school not full to capacity, with the teachers' children having no impact on waiting lists, but that the "concessionary fee" covered all costs incurred by the school in the course of educating those particular pupils.^[7] It was found, however, that during debate on the Finance Act, ministers had made statements in the House of Commons which supported the idea that such "benefits" should be excluded from tax.^[8]

Judgment

High Court of Justice and Court of Appeal

Following the report of the Special Commissioners, the case was appealed to the

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 [that Hansard may not be used] 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 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.[14]

In prior cases, the fear had been expressed that using parliamentary debates as evidence in court could violate

Agreeing with Browne-Wilkinson, Lord Griffiths also wrote, in regards to legislative interpretation, that:

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.[17]

Mackay, in his dissenting judgment, came to the same conclusion as the rest of the House on the interpretation of the Finance Act, but without the use of Hansard. Although he agreed that such a use would not violate Article 9, he argued that it was not appropriate:

I believe that practically every question of statutory construction that comes before the courts will involve an argument that the case [could use Hansard]. 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 ... 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.^[18]

For several judges, the use of Sheldon's statement in Parliament was a deciding factor. In the initial hearing, Lords Bridge,^[19] Browne-Wilkinson and Oliver were all in favour of dismissing Hart's case, later changing their mind with the new evidence available to them.^[20] Lord Griffiths, on the other hand, was not swayed by the use of Sheldon's statement; he wrote that "I should myself have construed the section in favour of the taxpayer without recourse to Hansard".^[21]

Significance

Change to the law

Before Pepper, it was impossible to use Parliamentary discussions as evidence in court cases; William Blackstone wrote in the 18th century that to allow judicial review of "unreasonable" legislation was to "set the judicial power above that of the legislature, which would be subversive of all government".^[22] Historically, the courts had been more lenient; while this suggestion first appears in the 14th century, with the intention that legislation was best interpreted by those who had written it, the principle was not strongly followed. In the 1678 case of Ash v Abdy,^{[nb 1]} Lord Nottingham chose to refer to the parliamentary history of the Statute of Frauds, and in Millar v Taylor,^{[nb 2]} in 1769, the first case to explicitly state this principle (as "The sense and meaning of an Act of Parliament must be collected from what it says when passed into law, and not from the history of changes it underwent in the House where it took its rise"),^[23] the court chose to depart from it.^[24] The principle was most used during the 19th and 20th centuries, with a noted example being Beswick v Beswick,^{[nb 3]} where Lord Reid maintained that it would be inconvenient and expensive for lawyers to have to refer to Hansard when preparing cases.^[25] Both the English and Scottish Law Commissions agreed with the rule in their 1969 Report on the Interpretation of Statutes.^[26]

During the late 20th century there was a gradual "retreat" from this rule; in Sagnata Investments Ltd v Norwich Corporation,

United States courts regularly use such interpretation, partially because there are significant differences between the British and American legislative systems. In the United States, legislation is regularly subject to negotiation and alteration after being introduced to Congress, and so it is in the courts' interest to look at the particular Act's history when interpreting it. The range of sources accepted is "richer and more diverse", with individual Senators and Representatives and members of the Executive called to give evidence all valid.^[36] In the Supreme Court of the United States, 145 decisions (approximately 20 percent of the decisions given) between 1996 and 2005 reference legislative history.^[37] In the House of Lords and Supreme Court of the United Kingdom, only 9.8 percent of decisions use legislative history as a tool.^[38] It is noted, however, that the House of Lords and Supreme Court rely on statutes less often than the United States equivalent.^[39] Michael Healy, writing in the Stanford Journal of International Law, notes that the use of statutory interpretation in the US Supreme Court combined with the uncertainty over what approach the court will take means lawyers have to write extremely broad arguments, increasing the cost of litigation – a concern raised in Pepper.^[40]

Approval

J. C. Jenkins, Second Parliamentary Counsel at the Office of the Parliamentary Counsel, has expressed some approval at the decision. Firstly, he claims that it will significantly change the way legislation is drafted. Prior to Pepper, draftsmanship was a "time consuming" and "frustrating rather than enlightening" business.^[41] There are risks of "excessive detail, over-elaboration, verbosity, prolixity, iteration, tedious repetition", and so a draftsman avoids directly dealing with every single problem, instead following the rule set out by the Renton Committee to ensure that "sufficient certainty is obtained for a fair-minded and reasonable reader to be in no doubt what is intended, it being assumed that no one would take entirely perverse points against the draft, or that such points would be brushed aside by the court". The draftsman may be in conflict with a government official who wishes to be overly specific, where this general rule renders their concerns moot; in such situations, the ability to include a passage of a Minister's speech as a way to ensure that the courts will interpret legislation in a specific way may clear up any doubts they feel. As such, Jenkins feels that Pepper may make the jobs of parliamentary draftsmen much easier.^[42] Although one academic called Pepper a "long overdue" decision from "which there is no turning back", the overall reaction was a negative one.^[43] The decision can be interpreted as promoting legislative supremacy, a key point in a system where parliamentary sovereignty is confirmed.^[44]

Criticism

The House of Lords' statement on parliamentary privilege was assessed by the

With these issues, Kavanagh argues that there are likely to be consequences. Firstly, if judges replace the text of a statute with the meaning given to it by a single minister in Parliament, there is a risk that they will attribute a meaning to it which was not supported by the MPs; interpretations, based on the views of ministers, are more likely to reflect the executive's intention than that of Parliament. Kavanagh also suggests that it could impact on the actions of ministers; rather than attempting to specify law through the difficult route of placing it in legislation, they can simply make a statement within Parliament about the legislation's intent.[49] Lord Mackay's worry that this would increase the cost of litigation was also considered; under Pepper, every lawyer must go through every word said in both Houses of Parliament and in the various committees to ensure that they are giving the best advice to their client. Academics have also expressed worry about the reliability of Hansard as a source; "the debate on the Bill is a battle of wits often carried out under extreme pressure and excitement where much more than the passage of this Bill may be at stake. The Ministers supporting it cannot be expected to act as if they were under oath in a court of law".^[50]

The decision also contradicted previous precedent as to the nature of evidence. John Baker notes that it violates strong rules which exclude the use of written evidence to interpret a document, unless the evidence was found in said document.^[51] Baker also argued that ministerial statements should not be used as evidence because they are irrelevant; "no individual member of Parliament is in a position to state what that intention is or to speak for the silent majority. Parliament acts as a corporate body and the only expression of its common intention is the text to which the Queen and both Houses have given their unqualified assent. What passes in one House is not formally known to the other". An individual MP's statements, minister or not, may be based on a false understanding of the legal issues; MPs regularly vote for proposals having disagreed with the statements of the spokesman simply because they like the proposal itself.^[52]

J. C. Jenkins, who interprets Pepper as making the jobs of parliamentary draftsmen much easier in some ways, also foresees it as making the job more difficult. Because of the added resources courts can draw on, there is now increased pressure to produce statutes which will not be interpreted in the wrong way. Departments sponsoring legislation normally prepare briefings for their ministers when talking in Parliament; draftsmen may now be expected to vet these, a time-consuming process. The draftsmen may also have to look at material produced by these departments other than the statutes, as it may be discussed in court; in Pepper,

There has been a dispute over the interpretation of the House of Lords' intent in regards to the use of Hansard in court, sparked by Lord Steyn's Hart Lecture on 16 May 2000, titled "Pepper v Hart: A Re-examination". Steyn suggested that Pepper v Hart was limited to "an estoppel argument", and Hansard's use in court should "be confined to the admission against the executive of categorical assurances given by ministers to Parliament"; essentially, that Hansard should only be used if the purpose is to establish that ministers made certain assurances to Parliament, with the intent being to prevent the executive going back on its promises.^[55] Stefan Vogenauer disagrees that this was the House of Lords' intent in Pepper, pointing out that Hart's counsel had, during proceedings, made an argument along the lines of estoppel – one the Lords had completely ignored when making their decision.^[56]

The courts' cautiously optimistic acceptance of Pepper, which included an attempt to include it in the House of Lords' Practice Directions, soon began to wane. Although the lower courts applied the decision and allowed the use of Hansard, and the Lords itself initially followed it in