English Business Law. Statutory Interpretation

Term Paper, 2008

11 Pages, Grade: 2,3



Table of Contents

Introduction to Business Law Assignment

1) Introduction to the sources of English Law

2) How is a statute passed?

3) Interpretation of statutes
3.1) Rules of statutory interpretation
3.1.1) Literal rule
3.1.2) Golden rule
3.1.3) Mischief rule
3.1.4) Ejusdem generis rule
3.1.5) Expressio unius est exclusio alterius rule
3.1.6) Noscitur a sociis rule
3.2) Intrinsic aids
3.3) Extrinsic aids
3.4) Presumptions

4) Conclusion

References and Bibliography

Identify one area from those listed below and undertake a critical analysis of the effectiveness of your chosen area in satisfying the objective of access to justice:

- The civil justice system
- The criminal justice system
- Precedent
- Statutory interpretation
- The judiciary
- The legal professions
- The jury system
- The role of lay people
- Tribunals
- Alternative methods of dispute resolution (ADR)

Statutory interpretation

“A society governed by rules will also be governed by individuals who make, change, and enforce the law.”

(Stychin & Mulcahy, 2007, p.11)

1) Introduction to the sources of English Law

“The law affects every aspect of our lives; it governs our conduct from the cradle to the grave and its influence even extents from before our birth to after our death.” (Keenan & Riches, 2007, p.3)

Law, which is mainly a set of rules, directs the relationships between members of a society and is enforced by courts consisting of judges.

The legal system of England and Wales is based on common law, which means that “the law is common to the whole country, in contrast to law which varies according to local custom.” (Owens, 1995, p.2) In such a system the primary source of law is to follow a decision made in a precedent case. However, nowadays statute law, which is legislation enacted by Parliament, becomes more and more important. In spite of everything, at the end of the day judges will always be the ones who decide on how law should be applied in different cases.

2) How is a statute passed?

A statute is law enacted by legislature in the form of Acts of Parliament. Before an Act of Parliament comes into being, a bill must “pass through several stages receiving the consent of the Commons and Lords before it is presented for the Royal Assent”. (Keenan & Riches, 2007, p.19) This legislative process is illustrated in the following figure.

Abbildung in dieser Leseprobe nicht enthalten
(Keenan & Riches, 2007, p.19)

Although the members of Parliament, who draft the statutes, are skilled in the field of law they are no experts in the particular branch of law of which a future statute is part. They do not only have to deal with a whole range of different branches but also with a huge number of legislation, which results in the existence of obscure statutes with ambiguous wording. Hence, judges have a considerable degree of freedom in determining what the legislations means. This problem has the potential to lead to a miscarriage of justice.

3) Interpretation of statutes

According to Keenan and Riches (2007, p17), parliamentary supremacy implies that the validity of a statute cannot be questioned by the courts but the courts can exercise considerable influence over how the enacted law is applied to practical problems. The only exception for the sovereignty of Parliament is that judges must refuse to apply UK statutes that conflict with EU law.

Judges will analyse Acts of Parliament in several different cases, in which they have to try to interpret the words used by Parliament according to the intention the members had when they enforced the statute.

3.1) Rules of statutory interpretation

The different rules of interpretation only act as guidance for the judges, which causes an uncertainty of what rule a judge will apply. A systematic application of certain rules does not exist, so that judges may conflict with one another and achieve different results, which points out another possibility of miscarriage of justice. First of all, I will have a closer look at the three most important rules: literal rule, golden rule and mischief rule.

3.1.1) Literal rule

“According to the literal rule, if the words of a statute are clear and unambiguous, the court must give them their ordinary plain meaning, regardless of the result”. (Keenan & Riches, 2007, p.21)

The case Inland Revenue Commissioners v Hinchy (1960), dealing with the effect of the Income Tax Act 1952, shall serve as an example. “Section 25(3) of the Act stated that a person found guilty of tax avoidance should ‘forfeit the sum of £20 and treble the tax which he ought to be charged under this Act’”. (MacIntyre, 2007, p.18) The defence lawyer claimed that as a result, a £20 fine and three times the amount of avoided tax should be charged. But the House of Lords applied the literal rule, which caused Hinchy to pay a £20 fine plus a threefold of his whole tax bill for the year. Even though Hinchy avoided an amount of £14.25, he ended up paying slightly more than £438, which is comparable with a yearly earning of an unskilled worker in 1960. (MacIntyre, 2007, p.18) Since all other courts are bound to follow precedents created in the House of Lords, every tax avoider has to be fined in the same way Hinchy was fined.

At this stage, another possible miscarriage of justice can be identified.

According to MacIntyre (2007, p.19), the Parliament had a different meaning in mind, than that formulated by the House of Lords, when the Income Tax Act was passed. One could blame the Parliamentary draftsmen for the ambiguous wording of the statute, but it is nearly impossible for them to foresee every possible interpretation of a statute. Naturally, every lawyer will try to find an interpretation that would be suitable for the intentions of his client. Since the judges are the final decision makers, the intention of the Parliament will not always be respected.

However, to cure this miscarriage, Parliament has the possibility to rectify such a situation by passing an amending Act.

It is also possible that judges might interpret the same word differently. ”For example, this happened in the House of Lords’ decision of London and North Eastern Railway v Berriman (1946) where Lord Macmillan applied the ‘fair and ordinary’ approach and Lord Wright applied the ‘natural and ordinary’ meaning to the word ‘repairing’. The judges came to opposite conclusions.” (Mortimer, 2007, p.105)

3.1.2) Golden rule

“This rule is to some extent an extension of the literal rule and under it the words of a statute will as far as possible be construed according to their ordinary plain and natural meaning, unless this leads to an absurd result”. (Mortimer, 2007, p.99) In case a statute is capable of more than one literal meaning, the judge would prefer the least absurd meaning.

“For example, in Re Sigsworth (1935) it was held that a man who murdered his mother could not inherit her property even though he appeared to be entitled on a literal interpretation of the Administration of Estates Act 1925.” (Keenan & Riches, 2007, p.21-22)

3.1.3) Mischief rule

“A court will, where possible, interpret a statute in such a fashion as to remedy the ‘mischief’ that the statute was passed to remedy”. (Owens, 1995, p.17)

Since the mischief rule derives from Heydon’s case (1584), it is the oldest of the three rules. In this case, “it was established that before applying the mischief rule the court should ask itself four questions: 1. What was the common law before the Act was passed?

2. What mischief or problem did the Act seek to rectify?
3. What remedy had Parliament decided upon to cure the mischief?
4. What was the reason for providing the remedy?”

(MacIntyre, 2007, p.20)


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English Business Law. Statutory Interpretation
Ashcroft International Business School Cambridge  (Anglia Ruskin University)
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english, business, statutory, interpretation
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Anonymous, 2008, English Business Law. Statutory Interpretation, Munich, GRIN Verlag, https://www.grin.com/document/285782


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