Pepper (Inspector of Taxes) v Hart UKHL 3 is a landmark decision of the House of Lords on the use of legislative history in statutory interpretation. The court established the principle that when primary legislation is ambiguous then, in certain circumstances, the court may refer to statements made in the House of Commons or House of Lords in an attempt to interpret the meaning of the legislation. Before this ruling, such an action would have been seen as a breach of parliamentary privilege.Littleboy & Kelly (2005) p. 1
John Hart and nine others were teachers at Malvern College who benefited from a "concessionary fee" scheme that allowed their children to be educated at the college for one-fifth of the normal fees. The Inland Revenue attempted to tax this benefit based on the Finance Act 1976. There was a dispute over the correct interpretation of the act. The Special Commissioners charged with assessing the tax found in favour of Hart, but both the High Court of Justice and Court of Appeal of England and Wales found in favour of the Inland Revenue. The case then went to the House of Lords, which, making use of statements in Parliament as recorded in Hansard, found in favour of Hart. Lord Mackay, dissenting, argued that Hansard should not be considered admissible evidence because of the time and expense involved in a lawyer having to look up every debate and discussion on a particular statute when giving legal advice or preparing a case.
The decision met with a mixed reception. While judges cautiously accepted the judgment, some legal academics argued that it violated rules of evidence, damaged the separation of powers between the executive and Parliament and caused additional expense in cases. The decision was subjected to an assault by Lord Steyn in his Hart Lecture, delivered on 16 May 2000 and titled "Pepper v Hart: A Re-examination", in which he disputed exactly what the House of Lords had meant by their decision and also attacked the logic and legal theory behind it. Since Lord Steyn's lecture, several judicial decisions have limited the use of Pepper by the courts; the result of these changes, according to Stefan Vogenauer, is that "the scope of Pepper v Hart has been reduced to such an extent that the ruling has almost become meaningless".Vogenauer (2005) p. 654
Facts 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 Finance Act 1976,Nyman (1993) p. 69 Section 63 of which said that:
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.Davies (1993) p. 172 The Special Commissioners (an appellate body for income tax claims),Bradley (2007) p. 364 ruling in favour of Hart, noted that the school was not full to capacity, with the teachers' children having no impact on waiting lists; also that the "concessionary fee" covered all costs incurred by the school in the course of educating those particular pupils.Dyson (1990) p. 122 It also emerged, later, 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.Dyson (1990) p. 123
Judgment
High Court of Justice and Court of Appeal Following the report of the Special Commissioners, the case was appealed to the High Court's Chancery Division, where it was heard by Vinelott J. In his judgment (issued 24 November 1989), Vinelott decided, based on the act, that "any expense incurred" referred to the average cost of keeping pupils, not the costs of keeping the teachers' children as pupils,Dyson (1990) p. 124 reversing the Special Commissioners' decision.Dyson (1990) p. 125 The case was then heard by the Court of Appeal, which issued its judgment on 13 November 1990. The three judges confirmed Vinelott's decision, ignoring the Hansard element of the case and confirming that, based on the Act's text, "any expense incurred" referred to the average cost.Dyson (1990) p. 126
House of Lords Again appealed, the case came before a five-judge panel of the House of Lords. They initially agreed with the Court of Appeal by a 4–1 majority.Healy (1999) p. 238 At the end of the preliminary hearing, the judges became aware that, during the Finance Act's committee stage, Financial Secretary to the Treasury Robert Sheldon remarked (in response to a question about places for the children of teachers at fee-paying schools) "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", implying that the "expense" is meant to be the cost to the school, not the average cost of having a pupil there. As a result of this discovery, the House of Lords chose to reconvene as a seven-judge panel, consisting of Lord Mackay, Lord Keith, Lord Bridge, Lord Griffiths, Lord Ackner, Lord Oliver and Lord Browne-Wilkinson.Davies (1993) p. 173
The court reconvened and issued its judgment on 26 November 1992, read by Browne-Wilkinson. Browne-Wilkinson found in favour of Hart, and on the subject of Hansard wrote:
In prior cases, the fear had been expressed that using parliamentary debates as evidence in court could violate parliamentary privilege, under article 9 of the Bill of Rights 1688 (since using parliamentary debates as evidence would involve discussing what went on in Parliament within the courts).Littleboy & Kelly (2005) p. 2 Browne-Wilkinson held that:
Agreeing with Browne-Wilkinson, Lord Griffiths also wrote, in regards to legislative interpretation, that:
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:
For several judges, the use of Sheldon's statement in Parliament was a deciding factor. In the initial hearing, Lords Bridge,BAILII p. 4 Browne-Wilkinson and Oliver were all in favour of dismissing Hart's case, later changing their mind with the new evidence available to them.BAILII p. 8 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".BAILII p. 6
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".Girvin (1993) p. 475 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,Ash v Abdy 3 Swan 644 Lord Nottingham chose to refer to the parliamentary history of the Statute of Frauds, and in Millar v Taylor,Millar v Taylor 4 Burr 2303 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"),Girvin (1993) p. 476 the court chose to depart from it.Bates (1995) p. 127 The principle was most used during the 19th and 20th centuries, with a noted example being Beswick v Beswick,Beswick v Beswick AC 58 where Lord Reid maintained that it would be inconvenient and expensive for lawyers to have to refer to Hansard when preparing cases.Baker (1993) p. 353 Both the English and Scottish Law Commissions agreed with the rule in their 1969 Report on the Interpretation of Statutes.Girvin (1993) p. 477
During the late 20th century there was a gradual "retreat" from this rule; in Sagnata Investments Ltd v Norwich Corporation,Sagnata Investments Ltd v Norwich Corporation 2 QB 614 the courts allowed material to be submitted to determine the purpose of legislation (but not to interpret the statute), and in Pickstone v Freemans plc,Pickstone v Freemans plc AC 66 it was allowed to assist in the understanding of delegated legislation. A noted attack on the rule was made by Lord Denning in Davis v Johnson,Davis v Johnson AC 264 where he said that asserting that the courts could not use Hansard was similar to saying that the judges "should grope about in the dark for the meaning of an Act without switching on the light. In some cases Parliament is assured in the most explicit terms what the effect of a statute will be. It is on that footing that members assent to the clause being agreed to. It is on that understanding that an amendment is not pressed. In such cases I think the court should be able to look at the proceedings."Stallworthy (1993) p. 159 Despite these exceptions, the courts regularly maintained that it was not possible to use internal Parliamentary discussions as an aid to legislative interpretation.Bates (1995) p. 128 The result of Pepper was a reversal of that rule; a court could use internal Parliamentary discussions where it was relevant to "the very point in question in the litigation", where a piece of legislation is "ambiguous or obscure, or the literal meaning of which leads to an absurdity", with the intention being to understand "the mischief aimed at or the legislative intention lying behind the ambiguous or obscure words".Klug (1999) p. 246
The decision in Pepper has been linked to a positive move in statutory interpretation that had been proceeding since the end of the Second World War. Previously, the dominant approach was that of the literal rule, supplemented by the golden and mischief rules (that interpretations should not be made if they were to lead to absurdity, and that interpretations should take into account the intention behind the statute). These approaches all limited the amount of material which could be used by a judge when interpreting the actions of Parliament. Following the 1969 Law Commission report The Interpretation of Statutes, British courts began to use a more purposive approach, which directed that when interpreting a statute they should examine the purpose behind it, rather than simply using the text of the statute itself.Styles (1994) p. 152 In effect, this widened the amount of material judges could use, including not only the statute but reports made by government bodies, the Law Commission and Royal Commissions. The impact of Pepper was to include Hansard in this list of acceptable material, not only to establish the overall purpose of an act but to define what was meant by a particular provision.Styles (1994) p. 153
In other jurisdictions