Is the Pepper rule spicing up litigation?

Guy Fetherstonhaugh QC draws attention to a little known but important device for attacking statutes Lord Neuberger was interviewed about his life and times at the Chancery Bar Association Conference a couple of weeks ago by Dame Hazel Genn. Although he politely and rightly declined to identify judgments which he considered had been wrongly decided, he did respond to the question which decision he would overrule if he were able, by singling out Pepper (Inspector of Taxes) v Hart [1993] AC 593. Pepper assault Pepper is a decision of the House of Lords that only lawyers on the whole become excited about. Indeed, it brings to mind the witty put-down by counsel of a crusty judge presiding over the trial of an Irish labourer in the early 1900s. “Is your client familiar with the maxim res ipsa loquitur?” the judge asked. “My lord,” replied counsel, “on the remote hillside of County Donegal where my client hails from they talk of little else.” But bear with me. In Pepper, the court had to consider the meaning of the Finance Act 1976, in deciding the valuation of benefits for the purpose of income tax. The Court of Appeal rejected the appeal of the taxpayers, on the footing that the statutory language did not support their case. The taxpayers appealed to the House of Lords, seeking to cite the Parliamentary debates on the bill that became the 1976 Act, which supported their stance. In particular, 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 work in the way which its literal wording suggested. The taxpayers had a formidable obstacle in their way: the rule excluding any reference to the record of Parliamentary debates for the purpose of assisting the interpretation of statutes had its origin in the middle of the 18th century, and was said to be based on sound constitutional and practical reasons which had been endorsed by two recent commissions. The taxpayers ultimately prevailed, with the House deciding (by a majority) that reference to Parliamentary debates should be allowed in certain very restricted circumstances. Lord Browne-Wilkinson, with whom the majority agreed, said: “…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”. But he also held that even in such cases, references in court to Parliamentary material should only be permitted where (a) legislation is ambiguous or obscure, or leads to an absurdity; (b) the material relied on consists of one or more statements by a minister or other promoter of the bill together if necessary with such other Parliamentary material as is necessary to understand such statements and their effect; and (c) the statements relied upon are clear. Too much Pepper? The decision caused many to forecast a tidal wave of litigation, with parties seeking to undermine the literal wording of statutes by reference to what the promoter had intended the wording to mean. In practice, the Pepper industry has indeed led to a number of challenges – including some in high profile property cases (such as Spath Holme Ltd v North Western Rent Assessment Committee [2001] 3 EGLR 30 and (as a variant of the doctrine) Earl Cadogan v Sportelli [2009] 1 EGLR 153. For the most part, however, such challenges fail – usually on the ground that the supposedly clear words of the minister when promoting the bill are anything but. The first port of call for parties seeking to use the Pepper rule is Hansard – the famous record of proceedings in Parliament, including debates in committee. Some of the huge volume of that material is online, and therefore searchable – but the majority exists merely in hard copy. Those seeking to find consideration of the particular wording in a bill (the clause numbers of which will usually be different to the comparable section numbers in the eventual Act) have a long and difficult task ahead of them. This usually means that the outcome is very costly. It was this aspect which was of particular concern to Lord Neuberger, who drew attention to the sheer waste of time and money in cases of unsuccessful reliance on the rule. The courts appear to be increasingly prepared to look at any material that is likely to be genuinely helpful in illuminating the context within which legislation is to be construed (according to the judgment this year of the Upper Tribunal (Tax and Chancery Chamber) in Christianuyi Ltd and others v Revenue and Customs Commissioners [2018] UKUT 10 (TCC)). If that is right, the position is strikingly out of kilter with the approach to contractual interpretation, in which it must be regarded as settled at the highest level of authority that the only germane question is what the words mean, and not what their makers intended them to mean. As against that, however, the use of Pepper is perhaps more akin to rectification than interpretation: the use of extrinsic materials to show that the words of the statute do not reflect the communicated intentions of the draughtsmen. For the time being, at least, until another figure of the standing and belief of Lord Neuberger graces our highest court, we must perforce accept that litigants’ use of Pepper will grind on. Guy Fetherstonhaugh QC is a barrister at Falcon Chambers Cultura/REX/Shutterstock