© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Interpretation in general
GENERAL APPROACH​​
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Modern approach to drafting legislation
"[13] The correctness of this approach is reinforced, to my mind, by the fact that the new code of entrepreneurs' relief is drafted in the modern style associated with the Tax Law Rewrite Project. [Counsel for the taxpayer], who has appeared for the Trustees at all three hearings, opened his oral submissions to us by helpfully reminding us of what Lord Carnwath JSC said in relation to the Tax Law Rewrite Project in R (on the application of Derry) v Revenue and Customs Commissioners [2019] UKSC 19, [2019] 1 WLR 2754, at [7] to [10]. Lord Carnwath quoted from the explanation of the drafting approach for the project given by the then Financial Secretary to the Treasury in 2009, at [8]:
"The project now has a well-established approach to rewriting legislation, developed with the help of people whom it has consulted over a number of years. It restructures legislation to bring related provisions together and to provide more logical ordering. It also helps users by providing navigational aids, such as signposts, to make relevant parts of the legislation easier to find, and it has introductory provisions to set the scene. It unpacks dense source legislation by using shorter sentences and, where possible, it harmonises definitions. It uses modern language and helps the reader with aids such as formulae, tables and method statements, when appropriate."
[14] Lord Carnwath also quoted from, and endorsed, the guidance given by Sales J (as he then was) in Eclipse Film Partners (No.35) LLP v Revenue and Customs Commissioners [2014] STC 1114 at [96], where he "likened the correct approach to statutory interpretation to that appropriate to a consolidation statute (as explained by the House of Lords in Farrell v Alexander [1977] AC 59)":
"When construing a consolidating statute, which is intended to operate as a coherent code or scheme governing some subject matter, the principal inference as to the intention of Parliament is that it should be construed as a single integrated body of law, without any need for reference back to the same provisions as they appeared in earlier legislative versions … An important part of the objective of a consolidating statute or a project like the Tax Law Rewrite Project is to gather disparate provisions into a single, easily accessible code. That objective would be undermined if, in order to interpret the consolidating legislation, there was a constant need to refer back to the previous disparate provisions and construe them."
[15] Although the entrepreneurs' relief code did not, as I understand it, form part of the Tax Law Rewrite Project as such, the fact that it was drafted in the modern style to which the Financial Secretary referred in 2009, and the fact that it was inserted into a consolidation statute, mean in my judgment that we should be guided by similar principles when construing it. We should also remember that, as Lord Carnwath put it in Derry at [10]:
"… the resulting statutes are intended to be relatively easy to use, not just by professionals but also by the reasonably informed taxpayer, and that the signposts are there for a purpose, in particular to give clear pointers to each stage of the taxpayer's journey to fiscal enlightenment."" (The Quentin Skinner 2015 Settlement L v. HMRC [2022] EWCA Civ 1222, Henderson, Lewison, Snowden LJJJ)
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Meaning of words used in light of context and purpose
"[48] The modern approach to statutory interpretation requires the courts to ascertain the meaning of the words used in a statute in the light of their context and the purpose of the statutory provision: see R (Quintavalle) v Secretary of State for Health [2003] UKHL 13, [2003] 2 AC 687 (per Lord Bingham of Cornhill at para 8) and, more recently, R (O and Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department [2022] UKSC 3, [2023] AC 255 ("R(O)") at paras 28 and 29, where Lord Hodge DPSC went on to explain at para 29:
"Words and passages in a statute derive their meaning from their context. A phrase or passage must be read in the context of the section as a whole and in the wider context of a relevant group of sections. Other provisions in a statute and the statute as a whole may provide the relevant context. They are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are therefore the primary source by which meaning is ascertained."" (Centrica Overseas Holdings Ltd v. HMRC [2024] UKSC 25, Lady Simler)
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"[39] An important point that these passages all make clear is that, while the words used are paramount (the "primary source"), they must be read in context. The context includes not only adjacent provisions but the "whole statutory scheme". A purposive approach must be adopted to determine whether the provisions were intended to apply to the transaction in question, viewed realistically." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588)
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"[34]...i) "The courts in conducting statutory interpretation are 'seeking the meaning of the words which Parliament used': Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591, 613 per Lord Reid" and the "primary source by which meaning is ascertained" is "the words which Parliament has chosen to enact as an expression of the purpose of the legislation": R (Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department [2022] UKSC 3, [2023] AC 255 ("Project for the Registration of Children"), at paragraph 29, per Lord Hodge;" (HMRC v. Innovative Bites Limited [2025] EWCA Civ 293, Newey, Males, Nugee LJJ)
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- Close attention to purpose of provision and realistic view of facts
"[70] Construction of statutes, and taxing statutes in particular, requires close attention to the purpose of the provision in issue, and a realistic view of the transaction or other matter to which it is alleged to apply. The relevant authorities were recently reviewed by this court in Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16; [2022] AC 690, paras 9-17. Two well-known dicta from those cases will suffice. The first, from Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51; [2005] 1 AC 684, para 32, by Lord Nicholls of Birkenhead, giving the joint opinion of the appellate committee of the House of Lords, is that the essence of the correct approach is:
"to give the statutory provision a purposive construction in order to determine the nature of the transaction to which it was intended to apply and then to decide whether the actual transaction (which might involve considering the overall effect of a number of elements intended to operate together) answered to the statutory description."
The second, from Ribiero PJ in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46, para 35, approved in Barclays Mercantile, is that:
"The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically."(R (oao Cobalt Data Centre 2 LLP) v. HMRC [2024] UKSC 40)
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- Not to downplay importance of language used
"This is not, however, to downplay the importance of the language of the provision to be construed. As Lord Hodge said in R (O) v Secretary of State for the Home Department [2022] UKSC 3; [2023] AC 255, para 29, "they are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are therefore the primary source by which their meaning is ascertained". That said, a "phrase or passage must be read in the context of the section as a whole and in the wider context of a relevant group of sections" (ibid, para 29) and "sources, such as Law Commission reports, reports of Royal Commissions and advisory committees, and Government White papers may disclose the background to a statute and assist the court to identify not only the mischief which it addresses but also the purpose of the legislation, thereby assisting a purposive interpretation of a particular statutory provision" (ibid, para 30)." (R (oao Cobalt Data Centre 2 LLP) v. HMRC [2024] UKSC 40)
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- Ordinary meaning supports predictability
"[12] Lord Nicholls' important constitutional insight in Spath Holme, that citizens with the help of their advisers should be able to understand statutes, points towards an interpretation that is clear and predictable. As Lord Hope DPSC stated in Imperial Tobacco Ltd v Lord Advocate [2012] UKSC 61; 2013 SC (UKSC) 153, at para 14:
"The best way of ensuring that a coherent, stable and workable outcome is achieved is to adopt an approach to the meaning of a statute that is constant and predictable. This will be achieved if the legislation is construed according to the ordinary meaning of the words used."" (For Women Scotland Ltd v. The Scottish Ministers [2025] UKSC 16)
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- Cannot mean two different things at the same time
"[25] Why then should the subsection be given a different meaning when the time limit is invoked in the context of a claim relating to the operation of an equality clause which relates to a period of employment prior to the date of a TUPE transfer? It is true that s.2(4) of the 1970 Act was enacted before the coming into effect of the Acquired Rights Directive and, consequently, before the making of the TUPE regulations which transferred all the transferor's rights, powers, duties and liabilities under or in connection with the contract of employment to the transferee but left any rights, powers, duties and liabilities under or in connection with an occupational pension scheme with the transferor: see regs. 5(2)(a) and 7(1)(b) of TUPE. But I do not think that the subsection can be taken to mean different things depending upon the part of the TUPE arrangements to which the claim relates.
[26] It is often said that a statute is always speaking. This is so, and where the language permits there is this element of flexibility. It can be adapted to contexts that were not foreseen when it was enacted. But the metaphor must not be pressed too far. A statute cannot speak with two different voices at one and the same time. The rule that s.2(4) originally laid down was that a claim in respect of the operation of an equality clause must be brought within six months of the end of the employment to which the claim related. It applied to each and every claim that might be made in respect of the contravention of a term modified or included by virtue of an equality clause: see reg. 2(1). The same rule must be applied where there has been a TUPE transfer. The only question is: to which employment does the claim relate? The answer, where the claim is in relation to the operation of an equality clause relating to an occupational pension scheme before the date of the transfer, is that it relates to the woman's employment with the transferor." (Powerhouse Retail Ltd v. Burroughs [2006] UKHL 13)
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Context​​
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- Grouping of phrases together may indicate thematic connection
"[35]...Where there is no clear, single ordinary meaning the Court of Appeal and the tribunals below were correct to consider the context and whether that assisted in identifying the correct meaning. It is clear that a different drafting technique has been used in List B (where items are grouped) and List C (where items are listed). In List B a choice has been made to identify specific structures which are to be excluded in all cases, to group those structures in separate lists and to decide the list to which each structure belongs. It is reasonable to conclude that those grouping choices were made for a reason, most obviously a thematic reason, if such can be identified." (SSE Generation Ltd v. HMRC [2023] UKSC 17)
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CONSTRUCTION NOT RECTIFICATION
“There is in this case no purposive construction that can prevent the redeemable shares from being part of the “ordinary share capital” of Streat, as that expression is defined by s 989 ITA, for the purpose of the definition of “personal company” in s 169S(3) TCGA…A definition such as that in s 989 ITA is apt to produce results which appear unfair. There will be deserving cases that fail to qualify for relief, and non-deserving ones that do qualify. Such a definition may enable those who are well-advised to fall within its terms, whilst leaving a trap for the unwary. There is certainly a case for the legislation to be reviewed to address what may understandably be perceived as unfairness in particular cases, of which this is one. That will, however, be a matter for Parliament if it determines that such a change should be made.” (HMRC v. McQuillan [2017] UKUT 344 (TCC), §43…45, Rose J and Judge Berner).
“In the context of the highly detailed provisions of Part 5 ITA 2007 and the use of the word “any” in section 173(2)(aa) it is impossible to ignore the preferential rights carried by the Ordinary Shares. To do so would, in Lord Hoffmann’s words, be to rectify the language of the statute rather than to construe it purposively.” (Flix Innovations Limited v. HMRC [2016] UKUT 301 (TCC), §44, Mann J and Judge Brannan).
“That is, however, no more than an exercise of construction. Whatever underlying purpose may be identified, it is not the task of the courts to import a different meaning to the provision in question than can properly be attributed to it, merely because of a perception that such a meaning would better suit the purpose so identified. That, to adopt the words of Lord Hoffmann in his British Tax Review article in 2005, referred to by Lewison J in Berry, would be an exercise in rectification and not construction.” (HMRC v Trigg [2016] UKUT 165 (TCC), §34, Asplin J and Judge Berner).
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- Cannot imply in a limitation that is not there (e.g. because it would be reasonable)
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"[32] The ambitious exercise on which Mr Cannon has embarked is, in effect, to imply into an Act of Parliament a limitation which is not there. In my judgment that is not an exercise which enables the court to interpret the words of section 116 of the Finance Act 2003 in the way that he suggests. As Lord Salmon put it in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 160:
"For a court to construe a statute is one thing but to graft a provision on to it on the ground that the court thinks it is reasonable to do so would bring the law into chaos … For the courts to graft a provision on to a statute or a contract is a practice which is entirely foreign to our jurisprudence and, as far as I know, to any other.[33] In agreement with the UT, I consider that the words of section 116 are clear and unambiguous; and do not produce absurdity. The suggested qualification is not there. I would dismiss the appeals." (Hyman v. HMRC [2022] EWCA Civ 185)
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SETTLED INTERPRETATION​​
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Judicial glosses​​
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- Seek the concept underlying the gloss rather than treat the words as statute
"In any such inquiry one must strive to avoid the all too tempting error of construing the actual words used in the speeches of the individual Lords of Appeal to express the concept which they had in mind as if those words formed part of the statute itself. What one is seeking are the characteristics of the taxable benefit in kind which are alluded to by those words. The underlying reason, as I think, for ascribing to the word "perquisite" in the Income Tax Acts a more restricted meaning than in ordinary speech is the simple notion that since income tax is payable in money, Parliament cannot have intended to exact it from employees in respect of benefits in kind from which the employee cannot himself by dealing with, forgoing or disposing of the benefit raise money to pay the tax.
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This argument, although accepted as valid by the Court of Appeal, is altogether too subtle for me. It is really no more than a linguistic one about what "convertible into money" means; and had these words been used in the taxing statute, we might have been driven to embark upon this sterile exercise. But they do not appear in any statute..." (Heaton v. Bell [1970] AC 728, at 765, Lord Diplock)
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Settled interpretation​​
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- Not determined how relevant settled practice is
"[163] Zedra also submits that a settled understanding as to the meaning of a statute is a legitimate aid to its interpretation where a statutory provision is ambiguous. It refers to R (N) v Lewisham London Borough Council [2014] UKSC 62; [2015] AC 1259 in which Lord Carnwath discussed a settled understanding principle at paras 81–98 and Lord Hodge, writing the majority judgment (Lords Wilson, Clarke of Stone-cum-Ebony and Toulson in agreement), suggested at para 53 that such a principle is available if there is ambiguity in the statutory provision.
[164] As Mr Thompson properly points out, both Lord Neuberger and Lady Hale, at paras 147–148 and 168, expressed reservations about the principle. Lord Neuberger expressed caution about second-guessing Parliament where it had merely re-enacted a previous statutory provision. He questioned the constitutional propriety of the Supreme Court, in reliance on a decision of the Court of Appeal interpreting an earlier statute, holding that a current statute meant something other than this court thought that it meant (para 147). Further, he expressed "even greater reservations" that a court should give effect to a customary meaning if that clashed with its fundamental duty to give effect to the will of Parliament as expressed in statute (para 148). Lady Hale shared Lord Neuberger's concerns, pointing out that people should know that decisions of lower courts can be overturned on appeal (para 168).
[165] The scope and role of a settled understanding have not been authoritatively resolved. On the one hand the Judicial Committee of the Privy Council in Primeo Fund v Bank of Bermuda (Cayman) Ltd [2023] UKPC 40; [2024] AC 727 in its discussion of the scope for a plea of contributory negligence in a defence to a contractual claim attached considerable importance to the fact that Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 had been accepted as settled law for 35 years (para 353). On the other hand, Lord Hamblen in Wathen-Fayed v Secretary of State for Housing, Communities and Local Government [2025] UKSC 32; [2025] 1 WLR 3693, in a judgment with which Lord Reed, Lord Leggatt, Lord Stephens and Lady Simler agreed, stated that it had not yet been authoritatively determined whether settled practice is relevant to statutory interpretation and stated: "If there is such a principle, there is much to be said for the view that its relevance is limited to providing evidence that the statutory words are capable of conveying the settled meaning and that that meaning is workable in practice..." (paras 62 and 66).
[166] It is not necessary in this case to venture further in a discussion of the boundaries of a principle of interpretation of statutes in which some weight may be placed on settled practice. It does not apply in this case. This is, first, because there is no reported English judicial decision before this case in which a judge has addressed himself or herself to both the interpretation of sections 8 or 9 of the 1980 Act and the application of either section to what are now the unfair prejudice provisions in sections 994 and 996 of the CA 2006. A settled practice, or widespread belief, is not the same as an authoritative decision on the meaning of provisions of the 1980 Act. Secondly, in cases such as Rahman the courts have held that there are limitation periods applicable to statutory provisions, such as section 139 of the Consumer Credit Act 1974 which, by giving the court a wide range of forms of discretionary relief, can be seen as in some measure analogous to sections 994 and 996 of the CA 2006." (THG Plc v. Zedra Trust Company (Jersey) Ltd [2026] UKSC 6)
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- Comes a time when interpretation so well settled, contrary is unarguable
"[53] There comes a time in the life of a statutory provision when a particular construction becomes so well settled and for such a long time, that the contrary construction becomes unarguable, however attractive it might have been when the statute was originally enacted. That is, in my view, the case in relation to the applicability of section 53(1)(c) to equitable interests in property other than land, and certainly to such interests in shares." (Frenkel v. LA Micro Group (UK) Ltd [2024] UKSC 42)
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- Contemporaneous judicial appreciation of context likely to be more accurate than many years later
“An important element in the construction of a provision in a statute is the context in which that provision was enacted. It is plain that those affected by the statute when it comes into force are better placed to appreciate that context than those subject to it 30 years later. The 1981 Act was introduced as a successor to legislation of similar character dating back to 1935. I would not readily have been persuaded that those who, when the 1981 Act came into force, charged and paid levies on imports of fish and fish products had misunderstood the effect of the Act.” (Bloomsbury International Ltd v. Department for Environment, Food and Rural Affairs [2011] UKSC 25, §61, Lord Phillips).
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- Novelty is no bar to an interpretation being correct but gives pause for thought
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“[148] I have even greater reservations about the so-called “customary meaning” rule. As just mentioned, a court should not lightly decide that a statute has a meaning which is different from that which the court believes that it has. Indeed, so to decide could be said to be a breach of the fundamental duty of the court to give effect to the will of Parliament as expressed in the statute.” (R (N) v. Lewisham LBC [2014] UKSC 62, Lord Neuberger).
“[168] I also share Lord Neuberger PSC's reservations about the “so-called customary meaning rule”. In In re Spectrum Plus Ltd [2005] 2 AC 680, the House of Lords was not deterred from over-ruling a decision of a highly respected High Court judge as to the effect of the wording of a particular debenture in common use, despite the fact that his decision had stood and been relied on by the banks for many years.” (R (N) v. Lewisham LBC [2014] UKSC 62, Lady Hale).
"[71] We were informed by Ms McCarthy that the researches of HMRC have failed to come across any decision in which section 118(2), enacted 48 years ago, has previously been given the meaning attributed to it by the UT. While I accept, as the UT said in their Decision at [67], that "Novelty is no bar to the section having a wider application than many may have assumed in practice to date", it gives pause for thought." (HMRC v. Raftopoulou [2018] EWCA Civ 818, David Richards LJ)
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- Interested persons should be able to rely on consistent interpretation over long period
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“It is unnecessary in my view to attempt a general reconciliation of these various conflicting strands of authority or to explore the full breadth of the principle which they illustrate. My own respectful view is that Lord Blackburn's more liberal view is supported by considerations of common sense and the principle of legal certainty. Where an Act has been interpreted in a particular way without dissent over a long period, those interested should be able to continue to order their affairs on that basis without the risk of being upset by a novel approach.” (Isle of Anglesey County Council v. Welsh Ministers [2009] EWCA Civ 94, §43, Carnwath LJ)
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Parliament reuses words with settled interpretation​
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- Parliament re-uses words that have been given authoritative judicial interpretation
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"[26] There is another principle of statutory interpretation (usually referred to as the Barras principle). This principle is that where words in an Act of Parliament have been given a clear and authoritative judicial interpretation, and Parliament uses the same words in a subsequent Act in a similar context, those words will be taken to have been used in the same way as the courts had previously interpreted them: Barras v Aberdeen Steam Trawling and Fishing Co Ltd [1933] AC 402. But since we are concerned with guidance given by HMRC rather than with court rulings, that principle is not in play." (Hyman v. HMRC [2022] EWCA Civ 185, Lewison LJ)
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See also presumption re Parliament's knowledge of the existing law
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Parliament fails to intervene re decision on interpretation
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- Do not imply Parliamentary approval from failure to Act
“Under this heading, Mr Chamberlain relies on a passage in Bennion on Statutory Interpretation, 6th ed (2013), p 661:
“Parliament is normally presumed to legislate in the knowledge of, and having regard to, relevant judicial decisions. If therefore Parliament has a subsequent opportunity to alter the effect of a decision on the legal meaning of an enactment, but refrains from doing so, the implication may be that Parliament approves of that decision and adopts it. This is an aspect of what may be called tacit legislation.”
With respect to that distinguished author, I have difficulty with the phrase “tacit legislation”, if it is intended to connote some form of silent endorsement by Parliament implied from its failure to act. As Lord Nicholls made clear, Parliament legislates by what it says, or what is said under its authority, not by what it does not say.” (R (N) v. Lewisham LBC [2014] UKSC 62, §§81 – 82, Lord Carnwath)
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- Unless, perhaps, there has been a judicial decision at the time of re-enacting the same wording
“Whatever the true scope of the principle, I do not find the expression “tacit” legislation a very apt description. In such cases Parliament has not remained silent. Rather, the previous court decision (even at a level below the highest court) is relevant, because it is part of the background against which Parliament has spoken, and by reference to which accordingly its intention can properly be ascertained… In any event, we were referred to no authority which has applied that principle to a case where, as here, the most that can be said is that Parliament has failed to take what might have seemed an obvious opportunity to legislate. Absence of legislation may be governed by many factors which have nothing to do with the perceived merits of a possible change, not least parliamentary time and other Government priorities.” (R (N) v. Lewisham LBC [2014] UKSC 62, §§84 – 85, Lord Carnwath – Lord Hodge concurred (§53), Lord Neuberger and Lady Hale expressed doubts (§148, §168).
“Where once certain words in an Act of Parliament have received a judicial construction in one of the Superior Courts, and the legislature has repeated them without alteration in a subsequent statute, I conceive that the legislature must be taken to have used them according to the meaning which a court of competent jurisdiction has given to them.” (re Cathcart (1870) LR5 Ch App 703 at 706 per James LJ)
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Primary legislation often confers a right without complete code to exercise right
"[48] Where primary legislation confers a particular right it is not always (or even often) the case that it prescribes a complete code for the effective exercise of that right. That is commonly left to subordinate legislation. Where, as here the right in question is part of the rights embodied in the concept of access to justice, the procedure for its exercise is usually left to rules of court." (Attorney General v. Crosland [2021] UKSC 58)
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GAPS IN THE STATUTORY CODE​​
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Statute failing to specify consequences of non-compliance with procedural requirement
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- Look at whole structure to identify whether intention was that act done in breach should be invalid
"[57] In our view, the appropriate starting point for analysis is the guidance given in Soneji. The case concerned the making of confiscation orders in the Crown Court pursuant to the proceeds of crime legislation against defendants who had been convicted and sentenced in criminal proceedings, in circumstances where the stipulated statutory time limit for making such orders of six months after date of conviction had been exceeded. The Court of Appeal ([2003] EWCA Crim 1765; [2004] 1 Cr App R (S) 219) allowed an appeal against the making of the orders. The House of Lords ([2006] 1 AC 340) allowed the Crown's appeal and upheld the orders notwithstanding the breach of the statutory procedural requirement.
[58] As Lord Steyn held in his speech (with the substance of which the other members of the Appellate Committee agreed) the correct approach to a failure to comply with a provision prescribing the doing of some act before a power was exercised was to ask whether it was a purpose of the legislature that an act done in breach of that provision should be invalid. In summary, the court's power to postpone the making of a confiscation order was to make the sentencing process rather than the confiscation procedure as effective as possible; the judge's failure to adhere to the statutory requirements for making a confiscation order had caused no prejudice to the defendants in respect of their sentences and any other prejudice to them caused by the delay was outweighed by the public interest in not allowing convicted offenders to escape conviction for bona fide errors in the judicial process; and that accordingly that failure would not have been intended by Parliament to invalidate the confiscation proceedings, so the orders should stand.
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[68] In our view the correct approach in a case where there is no express statement of the consequences of non-compliance with a statutory requirement is first to look carefully at the whole of the structure within which the requirement arises and ask what consequence of non-compliance best fits the structure as a whole. Here the provisions of sections 78 and 79 call for a two stage process of notification of the RTM proposal to persons with an interest in the building to which the right to manage is (if validly exercised) to be applied." (A1 Properties (Sunderland) Ltd v. Tudor Studios TRM Company Ltd [2024] UKSC 27)
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- Some situations were intended to have a bright line rule
"[62] This does not mean that application of procedural rules in every statutory context turns on detailed examination of the consequences arising from the particular facts of the case, nor that a test of substantial compliance is properly to be applied in relation to every procedural rule. Examination of the purpose served by a particular statutory procedural rule may indicate that Parliament intended that it should operate strictly, as a bright line rule, so that any failure to comply with it invalidates the procedure which follows. An example would be the notice requirements for extending business tenancies under the Landlord and Tenant Act 1954, where failure to serve a notice in proper time means that the tenant loses their right to extend. The procedural rules there apply in a context where there is an established bilateral relationship between landlord and tenant, where the tenant is in a position to know clearly what it has to do and where both parties need to know clearly what property rights they have and may dispose of in the market." (A1 Properties (Sunderland) Ltd v. Tudor Studios TRM Company Ltd [2024] UKSC 27)
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- Other situations may justify a test of substantial compliance
"[63] Often, however, analysis according to the Soneji approach does not lead to such a clear-cut result. The statutory regime may reflect, and balance, a number of intersecting purposes, both as to substantive outcomes and as to the procedural protections inherent in the regime. In that situation, a more nuanced analysis may be called for. Soneji itself is an example of this. The purpose of depriving convicted offenders of the proceeds of their crimes had to be balanced against sufficient compliance with procedural protections available to them before they could be deprived of their property. A test of substantial compliance with a procedural rule may be an appropriate way to allow for such a balance to be struck between competing purposes. If there has been substantial compliance with the rule, so that the purpose served by it has largely (if not completely) been fulfilled, it may more readily be concluded that fulfilment of the competing substantive purpose of the legislation should be given priority. But we would observe that reference to "substantial compliance" begs the question of what purpose was supposed to be served by the rule and expresses a conclusion arising from the relevant analysis, rather than stating a test in itself. Statutory regimes involving procedural obligations are many and are highly varied, and there is no simple shortcut which avoids the need to undertake the analysis referred to in Soneji having regard to the particular provisions, scheme and purposes served by the statute in question." (A1 Properties (Sunderland) Ltd v. Tudor Studios TRM Company Ltd [2024] UKSC 27)
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- Significant but not conclusive weight attached to certainty of property rights
"[64] Pursuant to the Soneji approach it is relevant to have regard to the effect which the operation of a statutory process might have on property and contractual rights, and to draw such inferences as to Parliament's objective intention as might be appropriate in the circumstances. It is usually to be inferred that Parliament intends that there should be a reasonable degree of certainty regarding property rights and contractual rights. It is also usually to be inferred that Parliament intends that a person should not be deprived of property or contractual rights without being afforded a fair opportunity to enter objections. That inference is reinforced in the present context by the requirement of service of a claim notice on the wide range of persons identified in section 79(6). We will refer to them for convenience as "stakeholders".
[65] These points do not, in and of themselves, mean that the wider inquiry indicated by the approach in Soneji is unnecessary. The confiscation orders in Soneji affected property rights, but that did not lead ineluctably to the conclusion that the statutory requirement had to be strictly observed in order for the orders to be valid. It remained relevant to investigate the extent of any prejudice that the individuals might suffer if the orders were upheld. It also remained relevant to balance any prejudice suffered by the individuals against the general public interest intended to be promoted by the operation of the statutory regime." (A1 Properties (Sunderland) Ltd v. Tudor Studios TRM Company Ltd [2024] UKSC 27)
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- Non-compliance with procedural requirement to notify all landlords of right to manage claim rendering action voidable not void
"[87] We consider that the simplest way to provide a legal formula to give effect to Parliament's intention as to the consequences of the failure to give a claim notice to a visible landlord or other stakeholder under section 79(6) flowing from analysis in accordance with the approach in Soneji is that the failure renders the transfer of the right to manage voidable, at the instance of the relevant landlord or other stakeholder who was entitled to, but not given, a claim notice, but not void. It is voidable unless, or until, the tribunal approves the transfer scheme, as the outcome of the resolution of the dispute as to entitlement caused by a counter-notice by a person actually given a claim notice, or as the result of an application by the RTM company under section 85. If the scheme is disapproved by the tribunal, the RTM company will have to start again in any event.
[88] Of course, a consequence that the scheme is only rendered voidable is that the person with the right to seek avoidance can disclaim or otherwise abandon that right whereas, if it rendered the scheme void, the subsequent conduct of the relevant landlord or stakeholder would be irrelevant. There are numerous indications in this part of the CLRA that persons with a right to object should be able to waive that right. There is no jurisdiction in the tribunal to revisit and undo a transfer of the right to manage which has purportedly occurred as a result of the operation of section 90 or a determination of the tribunal, so the way in which a challenge would be brought would be by proceedings in the High Court simply seeking a declaration of rights (in the former situation) or seeking judicial review of the order of the tribunal and a declaration (in the latter). Since the exercise of a right to avoid is generally subject to equitable considerations, delay or other unconscionable conduct of the relevant landlord or other stakeholder could lead to the right to avoid being lost, or refused as a matter of discretion.
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[92] In both cases, the focus is on the position of the party directly affected by the procedural omission. The omission does not give other persons who are not so affected (for example, other landlords who have been properly served with a claim notice) a right to object to the making of a transfer order if the party who is so affected has not sought to complain about this. There is no good reason to suppose that Parliament intended that a person which has not itself been affected by a procedural omission in relation to another should acquire, by a windfall, a power to thwart the operation of the statutory process which it would not otherwise have enjoyed. If a party with a potentially valid substantive objection has not been properly served and has been left out of the process, they have a right to apply to the High Court, as explained above. Hence a RTM company cannot simply ignore them with impunity." ​(A1 Properties (Sunderland) Ltd v. Tudor Studios TRM Company Ltd [2024] UKSC 27)
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- Relevant that objective of legislation was to keep opportunities for obstruction to a minimum
"[98] ​First, the purpose of the legislative scheme as explained in the Consultation Paper includes the objective that opportunities for obstructive landlords to thwart the transfer of the right to manage should be kept to a minimum. The procedural requirements have not been included to create traps for the unwary, nor to afford unwarranted opportunities for obstruction on the part of objecting landlords who have not themselves been significantly affected by any particular omission to comply with them."​ (A1 Properties (Sunderland) Ltd v. Tudor Studios TRM Company Ltd [2024] UKSC 27)
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COMMENCEMENT​​
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- Wider definition in amended legislation applied to transaction prior to effective date to determine tax in period after effective date
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"[76] In our view, the FTT reached the correct interpretation in holding as it did and for broadly the right reasons. The point that CT is an annual tax correctly retained focus on application of the law as amended. The FTT correctly identified that s52 was concerned with the conditions for eligibility of debits sought to be made in a given period. The question of acquisitions only arose once a debit in respect of which relief was sought was in contention. It did not make sense for the effective date to be the date of acquisition when acquisitions only became relevant when a debit was sought in the relevant accounting period. When the relief came to be applied, there would be no justification for applying the related party definition which applied at the time of acquisition, because CT was interested in the date of the debit sought to be given effect in order to determine the applicable law; it was not interested in the date of acquisition. In short, the framework of rules applicable to the relevant debits sought in any given year is to be assessed by reference to the law applicable in that year." (Muller UK and Ireland Group LLP v. HMRC [2024] UKUT 273 (TCC), Trower J and Judge Raghavan)
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