Business Law - Statutory Interpretation and Judicial Precedence

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As society’s dynamics of interaction evolves through time due to technology, globalization and unpredictable future events, the law that governs the society has to evolve as a result. This is to ensure that justice is served with effectiveness and fairness. Henceforth, judges play an important role towards this development of the legal system to a certain extent, through their decisions made within the parameters of certain doctrines that provide consistency and guidance (Lewis, 2012). Two such doctrines are the judicial precedent and the statutory interpretation.

The judicial precedent is a major source of law that follows a Latin phrase “stare decisis” which refers to the obligation of courts to honor past precedents (Tufal, 2012). These past precedents are able to affect the development of law, as they can be binding, persuasive or original in nature towards future cases.

However, in order to fully understand how judges can develop the law through the doctrine of judicial precedent, it is necessary to understand the operation of the doctrine. At the end of every case, the judge will give a judgment and explain his/her decision and his/her reasons. These reasons are derived from the evaluation of the principles of law and the judge will explain them based on these principles which are also known as “Ratio Decidendi” in Latin, meaning the reasons for deciding (Lewis, 2012). This ratio is basically a binding precedent towards future cases of similar facts in lower courts or courts of the same level with certain exceptions such as the Practice Statement (1966) and distinguishing that allows the avoidance of precedents. In other words, judges from the higher courts are able to develop the law through overruling and reversing the decisions made by lower courts, as the lower court’s precedents do not bind them but instead act as persuasive precedents. While judges from the lower courts or the same courts are able to develop the law through avoiding precedents made by higher courts or courts of the same level via the exception of distinguishing. The only two courts that are able to overrule themselves to develop law are the European Court of Justice and the House of Lords (Practice Statement (1966)).

Distinguishing is done when a judge does not follow a binding precedent because the judge considers the material facts of the case to be different. An exemplary case to illustrate this would be Merritt v Merritt (1971). This is a case whereby Mr. Merritt and his wife jointly owned a house and Mr. Merritt left to live with another woman. Mr. Merritt then made an agreement with Mrs. Merritt showing that he would pay a 40 pounds monthly sum and eventually transfers the house to her, if she keeps up the monthly mortgage payments. However, when the mortgage was finally paid, Mr. Merritt refused the transfer (Hickman, 2012). The binding precedent for this case was Balfour v Balfour (1919) whereby; family arrangements are not intended to create legal relations. However, the court of appeal distinguished the case because at that point of time the defendant and the claimant have decided to go for a divorce and hence there was an intention to create legal relations (Hickman, 2012).

Apart from the “Ratio Decidendi” in a judgment, there is also the “Obiter Dicta” which in Latin means “words said by the way”. The “Obiter Dicta” differs from the “Ratio Decidendi” as it is not binding but instead acts as a persuasive precedent towards future cases and it reflects a judge’s opinion (Tufal, 2012). In the obiter, a judge will state what their decision would have been if the facts were different. Hence, the obiter of a higher court, though not binding, would often be persuasive in nature towards lower courts if it were deemed to be relevant towards the case (Lewis, 2012). Examples of other persuasive precedents include the decisions of the courts in the Commonwealth, decisions of the Judicial Committee of the Privy Council and the...
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