- Building blocks for binding conclusion are also binding

 

“We conclude that the Court of Appeal’s decision on the meaning of ‘prescribed accounting period’ in s 73(2) was seen by the Court as a necessary part of the judgment they delivered and not simply a comment made in passing.  We say this because the Court of Appeal’s decision was on the meaning of ‘evidence of facts’ in s 78A(2).  It reached its decision on this based on four reasons.  The third reason given is at [52-55].  That reason was that ‘prescribed accounting period’ in s 73 refers to the period in which the repayment in issue was made.  In other words, the meaning of that phrase in s 73(2) was a building block on which the Court relied in making their judgment on s 78A(2).” (London School of Economics and Political Science v. HMRC [2015] UKFTT 291 (TC), §44, Judge Mosedale)

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- Not entirely a matter of what the deciding judge(s) intended

 

"[52] A second objection to the test proposed by Cross and Harris is that it appears to make the question whether a proposition of law constitutes ratio entirely dependent on whether the judge who decided the case intended it to have that status. However, as Cross and Harris themselves recognise, later courts sometimes interpret an earlier decision as authority for a proposition which is either wider or (more often) narrower than the reason or ruling treated by the judge as a step in reaching his or her conclusion in the precedent case: see Precedent in English Law (4th edn, 1991) at 72-74. In the words of Glanville Williams (quoted by Cross and Harris): "Courts do not accord to their predecessors an unlimited power of laying down wide rules."

[53] To give an illustration, in NWL Ltd v Woods (The Nawala) (No 2) [1979] 1 WLR 1294 the House of Lords recognised an exception or qualification to the formulation in American Cyanamid Co v Ethicon Ltd [1975] AC 396 of the test to be applied in deciding whether to grant an interim injunction, accepting that it is appropriate for a court to give greater consideration to the merits of the claim in a case where its decision is in practice likely to be dispositive of the action because the dispute will have become academic by the time a trial can take place. The House did not suggest that it was thereby departing from its earlier decision, but rather that it was elaborating or interpreting its earlier decision to address this category of case.

[54] Sometimes this technique is used by a court lower in the hierarchy than the court which decided the precedent case. For example, in Muller v Linsley & Mortimer [1996] PNLR 74 Hoffmann LJ (controversially) interpreted the decision of the House of Lords in Rush & Tompkins Ltd v Greater London Council [1989] AC 1280 that "without prejudice" communications are privileged from disclosure to third parties as limited to communications making admissions against interest, although such a limitation was not articulated in the unanimous judgment of the House of Lords." (R (oao Youngsam) v. Parole Board [2019] EWCA Civ 229, Leggatt LJ)

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- Open to lower court to consider whether true ratio is narrower than stated

 

"[55] Cross and Harris explain this feature of the doctrine of precedent on the basis that subsequent courts have a power to revise or modify the ratio of a past case, in particular by restricting its scope, in order to distinguish the earlier decision. A similar explanation has been given by some other commentators: see e.g. Raz, The Authority of Law (1979) at 183-189. However, while it may to some extent be a matter of semantics, it seems to me desirable and to accord better with judicial practice to use the term ratio decidendi to refer to a proposition which a lower court is bound to apply. It must therefore be recognised that there are circumstances in which a later court, even sometimes one at a lower level than the court which decided a precedent case, may properly consider that the true ratio of such a case is narrower than the ruling stated in the judgment.

[56] The potential for such interpretation reflects the difference between judicial decision-making and legislation. A court, even the highest court in our legal system, does not have authority to enact rules of law in the form of a canonical text which is to be interpreted and applied like a statute. The doctrine of precedent operates in a more flexible and open-textured way, which recognises that the primary task of any court is to decide the case actually before it, and which gives scope for the law to evolve and adapt as circumstances change or new factual situations are presented. As Lord Reid put it in Broome v Cassell & Co Ltd [1972] AC 1027, 1085:

"… it is not the function of noble and learned Lords or indeed of any judges to frame definitions or to lay down hard and fast rules. It is their function to enunciate principles and much that they say is intended to be illustrative or explanatory and not to be definitive." " (R (oao Youngsam) v. Parole Board [2019] EWCA Civ 229, Leggatt LJ)

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- Starting point is rulings and reasons given, but if framed broadly, evaluate the strength of the reasons

 

"[58] In looking for the ratio decidendi of a case, the starting-point is always the rulings and reasons given in the judgment(s) to justify the court's decision, read in the light of the facts of the case and the issues that arose. Generally, this is also where the inquiry ends. But where there is scope for argument that a rule or ruling stated in the precedent case was framed too broadly, or that the decision is for some other reason better explained on a different basis which would enable it to be distinguished, the search for the ratio will also involve an evaluation of the strength and persuasiveness of the reasons expressed in the judgment(s) or otherwise advanced or available for the ruling. Such an evaluation will require consideration of a wider legal context in order to assess whether and to what extent the reasoning and the result reached in the precedent case are consistent with other authorities and legal principles (including subsequent authorities and developments in the law).

[59] Whether it is permissible for a later court to engage in such an assessment depends on a variety of factors. Without seeking to be exhaustive, relevant considerations include: (1) the degree of unanimity or consensus among the judges (assuming there was more than one) who decided the precedent case; (2) the clarity or otherwise of the ruling and of the supporting reasoning; (3) whether or to what extent the point on which the court ruled was in dispute and/or the subject of argument; (4) whether or how clearly the court evinced an intention to establish a binding rule; (5) whether and to what extent prior relevant authorities were considered by the court; (6) whether the court would, or sensibly could, have reached the same result if it had not ruled as it did; (7) whether the court's ruling has been applied or approved in later cases; (8) whether the ruling or its underlying reasoning has been criticised by commentators or by judges in later cases; (9) whether the court considered or contemplated the factual situation that has arisen in the current case; and (10) the level in the court hierarchy of the court which decided the precedent case in comparison with the level of the court deciding the current case." (R (oao Youngsam) v. Parole Board [2019] EWCA Civ 229, Leggatt LJ)

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- Clear and explicit principle adopted by majority of supreme court not open to further evaluation by lower court

 

"[61] As mentioned earlier, the justification actually given by Lord Neuberger for dismissing Mr Whiston's appeal was that the requirements of article 5(4) are satisfied by the original sentencing decision for the full period of any determinate sentence, including any period after the prisoner has been conditionally released on licence. That principle was adopted as the basis for the decision in clear and explicit terms in a judgment endorsed by the majority of the Supreme Court. The relevant earlier authorities were discussed in the judgment and West's case, in which an inconsistent view had been taken by the House of Lords, was expressly said to have been wrongly decided. Moreover, Lord Neuberger's judgment left no doubt that it was intended to settle the law in this area unless and until the European Court of Human Rights decides to reconsider its jurisprudence. Nor has the broad principle adopted in Whiston's case been criticised or qualified in any subsequent case. To the contrary, as Nicola Davies LJ has explained at paragraphs 26 and 27 of her judgment, it has been treated by the Supreme Court in Brown v Parole Board for Scotland [2017] UKSC 69; [2018] 1 AC 1 as a correct statement of the law.

[62] In these circumstances I think it plain that it is not open to a lower court to embark on a consideration of whether the reasoning contained in Lord Neuberger's judgment – including his analysis of West's case and other earlier authorities – is persuasive or sound, or to examine whether the conclusion reached in Whiston's case is better explained on a narrower basis than that adopted by the majority of the Supreme Court. I am confirmed in this view by the responses of judges to attempts made in the past to argue in similar circumstances that pronouncements of the UK's highest court were obiter dicta. I will give three examples." (R (oao Youngsam) v. Parole Board [2019] EWCA Civ 229, Leggatt LJ)

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- ​The fact that different arguments were not deployed does not affect the ratio

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"[84] In my judgment, therefore, Merck must persuade us that Newron was decided per incuriam. This court gave consideration to the meaning of that expression in Morelle Ltd v Wakeling [1955] 2 QB 379. The judgment of the court states at 406:

"As a general rule the only cases in which decisions should be held to have been given per incuriam are those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned: so that in such cases some part of the decision or some step in the reasoning on which it is based is found, on that account, to be demonstrably wrong."
[85] They added:

"In our judgment, acceptance of the Attorney-General's argument would necessarily involve the proposition that it is open to this court to disregard an earlier decision of its own or of a court of co-ordinate jurisdiction (at least in any case of significance or complexity) whenever it is made to appear that the court had not upon the earlier occasion had the benefit of the best argument that the researches and industry of counsel could provide. Such a proposition would, as it seems to us, open the way to numerous and costly attempts to re-open questions now held to be authoritatively decided."" (Merck Serono SA v. Comptroller-General [2025] EWCA Civ 45, Lewison, Arnold, Birss LJJ)

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"[136] First, although the facts of the Fleming case itself may not have been similar to those in the present case, the facts of Condé Nast were materially similar. This is because there were some payments which had been made in a period (the three years before the new limitation period came into effect on 1 May 1997) when there would still have been time on the facts to bring a claim for restitution of wrongly paid tax even under the new limitation period. That did not prevent the House of Lords reaching the decision which it did, of disapplying the new time limit in respect of all of the claims before it. The ratio of a case is the legal principle which is necessary to explain the outcome of that case on its facts. I cannot see how Mr Baldry's argument can account for the actual outcome on the facts of Condé Nast.
[137] Secondly, the fact that different arguments might have been deployed in an earlier case does not prevent the relevant legal principle from forming part of its ratio. In a slightly different context, because it concerned an earlier decision of this Court rather than an earlier decision of the House of Lords or Supreme Court, Sir John Donaldson MR said of the doctrine of per incuriam:
"I do not understand the doctrine to extend to a case where, if different arguments had been placed before it or if different material had been placed before it, it might have reached a different conclusion."
See Duke v Reliance Systems Ltd [1988] QB 108, at 113 (emphasis in original).

[138] The position appears to be different if a point of law was simply assumed to be correct in an earlier decision (even that of a superior court) without any argument on it: see e.g. FSHC Group Holdings Ltd v GLAS Trust Corpn Ltd [2019] EWCA Civ 1361, [2020] Ch 365, at [136] (Leggatt LJ, giving the judgment of the Court). But Fleming was not such a case: there was argument on the material issue of law. What Mr Baldry's submission really amounts to is that there was a better argument available to HMRC, which it did not advance at that time and which it now does.
[139] In my view, there is an important distinction in principle between a case in which an argument was not advanced on the earlier occasion and a case in which the legal issue was entirely different: see, by way of example, R (Elias) v Secretary of State for Defence [2006] EWCA Civ 1293, [2006] 1 WLR 3213. In that case, there had been an earlier decision of the Court of Appeal in which a challenge to the very same scheme now under challenge had been rejected: see R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473, [2003] QB 1397. That did not prevent the Court of Appeal from reconsidering the matter (and indeed deciding it in favour of the claimant) because there was an entirely new legal issue and a different ground of challenge advanced in Elias, which had not been raised in the earlier case. In the earlier case, the grounds of challenge were the conventional public law grounds of irrationality and breach of legitimate expectations; whereas, in Elias, the grounds arose under the Race Relations Act 1976. This was not therefore simply a case where different arguments were advanced which had not been made in the earlier case; the legal issues were themselves different.
[140] In the present case, in contrast, the legal issue is on proper analysis the same as that which arose in Fleming (on the facts of Condé Nast) and the decision in that case is binding on this Court." (Jazztel Plc v. HMRC [2022] EWCA Civ 232, per Singh LJ)​​​​

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- Points assumed/not argued are not binding (but only applied in most obvious cases)

 

[73] "The view that these dicta were obiter is supported by the absence of any reported argument on the point: it is unlikely that the House would have decided such an important point, as part of the ratio decidendi, without its having been argued by counsel, or at least raised with them. It is also supported by the absence of any discussion of the point in the dissenting speech of the remaining member of the committee, Lord Walker of Gestingthorpe. It is unlikely that he would have ignored the point if he had understood it to be part of the ratio of the majority decision." (R (oao Elan-Cane) v. Secretary of State for the Home Department [2021] UKSC 56)

 

"[139] I must, however, return to what David Richards LJ said in Euro Wines at [7] and HMRC's criticism of it: see [126] above. The first point to be made is that the case concerned the validity of the reverse burden of proof imposed on the taxpayer by section 154(2) of CEMA 1979, and the court's reasoning was therefore principally directed to that issue. It was unnecessary for the court to decide where the burden of proof lay in relation to the other elements of liability to the penalty under para 4(1) of schedule 41 to FA 2008. The judge's observations on that subject in [7] were therefore obiter. Secondly, the judge's observations merely reflected the conditions of liability as set out in para 4(1) of the schedule, and there is no indication that the question in the present case was raised before the court in any shape or form. The nearest approach to it was in the appellant taxpayer's first ground of appeal, which was that the UT had "failed to recognise or to attach appropriate weight to the fact that pursuant to paragraph 4(1) of Schedule 41 to the 2008 Act the revenue had to conduct an investigation and confirm that duty was outstanding on the goods and so was the appropriate party to prove that duty had not been paid": see [2018] 1 WLR 3248 at 3249G and the judgment at [29]. David Richards LJ no doubt had this ground of appeal and counsel's submission in support of it well in mind when he said what he did in [7], and I need hardly add that any statement of his must have strong persuasive force, especially as the other members of the court (Patten and Gloster LJJ) agreed with his judgment without qualification. However, with the benefit of the detailed argument in the present case I have to say that, in my respectful view, the dicta of David Richards LJ about the burden of proof on HMRC in [7] were mistaken and should not be followed." (HMRC v. Sintra Global Ltd [2025] EWCA Civ 1661, Henderson LJ)

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"[138] The position appears to be different if a point of law was simply assumed to be correct in an earlier decision (even that of a superior court) without any argument on it: see e.g. FSHC Group Holdings Ltd v GLAS Trust Corpn Ltd [2019] EWCA Civ 1361, [2020] Ch 365, at [136] (Leggatt LJ, giving the judgment of the Court). But Fleming was not such a case: there was argument on the material issue of law. What Mr Baldry's submission really amounts to is that there was a better argument available to HMRC, which it did not advance at that time and which it now does."  (Jazztel Plc v. HMRC [2022] EWCA Civ 232, per Singh LJ)

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"[134] We are satisfied that we are not prevented from doing so by this court's decision in the Daventry case because in that case the Court of Appeal proceeded on the basis that Lord Hoffmann's analysis was correct in circumstances where the parties argued the case on that assumption. Moreover, two members of the court expressed concerns about the reasoning in the Chartbrook case, suggesting that it may have to be reconsidered in a future case.
[135] A similar question potentially arose in Joscelyne v Nissen [1970] 2 QB 86, 98-99, as to whether the Court of Appeal was bound by its previous decision in Crane v Hegeman-Harris Co Inc [1939] 4 All ER 68 which approved the analysis of Simonds J, but did so in circumstances where the correctness of that analysis had not been disputed. On the question whether a binding precedent had nevertheless been created, the members of the Court of Appeal in Joscelyne expressed themselves "attracted by a suggestion that the conceded point of law should be open to argument in another case," provided it was made plain that this would not apply where "an argument, though put forward, had been only weakly or inexpertly put forward".
[136] Subsequent authorities have clearly established that the suggestion which attracted the Court of Appeal in Joscelyne v Nissen is a correct approach and that a court is not bound by a proposition of law which was not the subject of argument because it was not disputed in an earlier case (even if that proposition formed part of the ratio decidendi of the case). In Re Hetherington, deceased [1990] Ch 1 at 10, Sir Nicolas Browne-Wilkinson V-C held that, as a first instance judge, he was entitled to decline to follow even a decision of the House of Lords in which a proposition of law necessary for the decision was not disputed. After a review of the authorities, he concluded that:
"… the authorities therefore clearly establish that even where a decision of a point of law in a particular sense was essential to an earlier decision of a superior court, but that superior court merely assumed the correctness of the law on a particular issue, a judge in a later case is not bound to hold that the law is decided in that sense."
See also R (Kadhim) v Brent London Borough Council [2001] QB 955, para 33; Rawlinson & Hunter Trustees SA v SFO (No2) [2014] EWCA Civ 1129; [2015] 1 WLR 797, para 43." (FSHC Group Holdings Limited v. GLAS Trust Corporation Limited [2019] EWCA Civ 1361, Leggatt, Rose, Flaux LJJJ)

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"[33]...In support of [its] submission, [the taxpayer] referred us to the decision of the Supreme Court in Egon Zehnder Ltd v Tillman [2019] UKSC 32 in which Lord Wilson said at [21]:

"When a court makes an assumption about the law, instead of reaching a focused determination in relation to it, the decision based upon it does not carry binding authority under the doctrine of precedent: National Enterprises Ltd v Racal Communications Ltd [1975] Ch 397, 406-408."

[34] In National Enterprises Ltd v Racal Communications Ltd, the Court of Appeal had held that where an appeal was dismissed only on the grounds put forward, that decision was not authority that the court had jurisdiction in such cases since that issue had not been addressed.  That case was considered by the Court of Appeal in R (Kadhim) v Brent LBC Housing Benefit Review Board [2000] EWCA Civ 344 ('Kadhim').  In Kadhim, the Court of Appeal held at [33] that:

"... there is a principle stated in general terms that a subsequent court is not bound by a proposition of law assumed by an earlier court that was not the subject of argument before or consideration by that court." 

[35] However, the Court of Appeal urged caution in Kadhim at [38]:

"Like all exceptions to, and modifications of, the strict rule of precedent, this rule must only be applied in the most obvious of cases, and limited with great care.  The basis of it is that the proposition in question must have been assumed, and not have been the subject of decision.  That condition will almost always only be fulfilled when the point has not been expressly raised before the court and there has been no argument upon it: as Russell LJ went to some lengths in National Enterprises Ltd v Racal Communications Ltd to demonstrate had occurred in the previous case Davies Middleton & Davies Ltd v Cardiff Corpn 62 LGR 134.  And there may of course be cases, perhaps many cases, where a point has not been the subject of argument, but scrutiny of the judgment indicates that the court's acceptance of the point went beyond mere assumption.  Very little is likely to be required to draw that latter conclusion: because a later court will start from the position, encouraged by judicial comity, that its predecessor did indeed address all the matters essential for its decision."

...

[42] We accept that a proposition assumed without argument is not authority (see Kadhim at [20]) and we do not simply rely on proposition 6 of Pegasus Birds as establishing that the taxpayer bears the burden of proof in relation to section 73(6)(b).  However, we agree with proposition 6." (Nottingham Forest FC Limited v. HMRC [2024] UKUT 145 (TCC), Judges Sinfield and Paines KC)

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“…the Special Commissioner observed, at page 273, that the withdrawal by the Revenue of its claim to tax the award in respect of injury to feelings was “rightly made.” As it was not the subject of any argument and the Special Commissioner did not discuss the issue at all in the decision, we do not regard Walker as providing any support for the proposition that any part of a payment that is attributable to injury to feelings is not a payment made in connection with the termination of employment and thus is not subject to income tax.” (Moorthy v. HMRC [2016] UKUT 13 TCC, §28, Rose J and Judge Sinfield).

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“However, because there was no argument on that point, the decisions do not constitute an authority on that point.” (R (oao Derry) v. HMRC [2015] UKUT 416 (TCC), §43, Morgan J).

- Proposition accepted without comment is binding

 

"[44] On the basis of the authorities discussed above, we accept that Pegasus Birds is not binding on us as authority for the proposition that the taxpayer bears the burden of proving that an assessment was made late.  That does not mean, however, that the proposition is wrong or that we should not apply it.  Moreover, the proposition that the taxpayer bears the burden of proof was accepted without comment by the Court of Appeal in Lithuanian Beer CA and we consider that case is authority on the point and binding on us for the reasons below.

...

[46] We bear in mind the Court of Appeal's guidance at [38] in Kadhim, set out at [35] above.  It is clear that holding that a decision of a superior court is not a binding authority for a point because it was assumed without argument should only be done in the most obvious of cases and limited with great care.  We consider that the decision in Lithuanian Beer CA is an example of the situation mentioned by Buxton LJ in [38] of Kadhim where a point has not been the subject of argument but scrutiny of the judgment indicates that the court's acceptance of the point went beyond mere assumption.  Although there is no discussion about who bore the burden of proof on Lithuanian Beer CA, Sales LJ clearly understood that the FTT's decision depended on the appellant having the burden of proof (see [11] of the judgment).  We consider that, in the circumstances, it is inconceivable that Sales LJ would not have commented if he had considered that the FTT was wrong to have relied on proposition 6 of Pegasus Birds in reaching its decision.  Accordingly, we consider that Sales LJ's acceptance of the proposition went beyond mere assumption and Lithuanian Beer CA is binding authority for the proposition that the burden is on the taxpayer to show that an assessment was made outside the time limit specified in section 73(6)(b) VATA."  (Nottingham Forest FC Limited v. HMRC [2024] UKUT 145 (TCC), Judges Sinfield and Paines KC)

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