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In the Course of several centuries the courts have developed a number of principles to assist in ascertaining the meaning of statutory provisions. These principles generally apply to all statutes except that in taxation legislation, as the courts first encountered such laws generally with “the same judicial intolerance as that accorded to penal statutes.” This approach has given rise to certain rules of construction. Included within this are capital allowances on property improvements.
The three main rules (also referred to as principles) of statutory construction are the literal, golden and mischief rules. The Literal Rule. The literal rule seeks to ascertain the intention of the legislature by examining the “ordinary and natural” meaning of words used in the Act. the words must be understood in their context. If the words are clear the court must follow them, regardless of the consequences. Special rates apply in different contexts, read here for special rate pool.
If the Act leads to unusual or bizarre results, it is for Parliament, not the courts, to correct the aberration. The Golden Rule. This rule is used in this way: where the literal meaning of words used “would lead to some absurdity, or some repugnance or inconsistency with the rest of the document, the literal meaning may be modified so as to avoid the absurdity and inconsistency, but no further.”
However, the problem that may arise is whether or not a provision produces an absurd result in a given set of circumstances and how far the literal meaning may be twisted to remove the absurdity. The Mischief Rule. Where the meaning of a provision is unclear, the mischief rule is used to direct the court to ascertain the meaning of a provision by reference to the law before the enactment, the mischief which that law created and the remedy which Parliament intended to cure the defect. If you need further clarification then click here for capital allowances explained.
By employing the mischief rule the court interprets the legislation so as to “suppress the mischief and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief... and to add force and life to the remedy according to the true intent of the makers of the Act...”.
To put it in simple language the court identifies the problem which the legislation was designed to remedy and then interprets the legislation so as to ensure that the legislature’s aim is achieved. General Rule of Construction. A tax imposed by an Act must be by clear unambiguous language.
The statute imposing the tax is given a strict interpretation. In relation to stamp duty, it was observed: “The law upon the subject of stamps is altogether a matter positive juris (rules imposed by the Sovereign on subjects: law proper as opposed to moral law). It involves nothing of principle or reason but depends altogether upon the language of the legislature.”
This principle has been aptly summarised by Rowlatt J in Cape Brandy Syndicate v Commissioners: “In taxation you have to look simply at what is clearly said. There is no room for any intendment; there is no equity about a tax; there is no presumption as to a tax; you read nothing in; you imply nothing, but you look fairly at what is said and at what is said clearly and that is the tax.” Any hardship arising from the construction of the law is to be ignored so long as there is no doubt as to liability, this includes integral features capital allowances.
The words are to be adhered to. However, an ambiguity in the charging provisions is to be resolved in favour of the taxpayer. He gets the benefit of any doubt. However, words of exception confining the operation of the tax are to be given a liberal construction.