Prospective overruling is not to declare the law as it has always been,
but to change it for the future
speech in 1987 Lord Mackay LC discussed the possibility of allowing
prospective overruling, whereby the court might uphold the existing
precedent in the instant case but declare it overruled for the future.
litigants are prepared to accept defeat if the judge decides the law is
against them, but to be told that they had won their case only for future
litigants, not for themselves, would seem ludicrous.
But this view has changed in
National Westminster Bank v Spectrum  HL.
The effect of
National Westminster Bank v Spectrum  HL
Lord Nicholls giving the
lead judgment of the Committee gave a clear explanation of how judicial
precedent is to be viewed.
There are he said, four
Courts are adjudicative, they
decide the legal consequences of past happenings
Hierarchical principles of 'stare
Change does not always involve
departing from or overruling a previous court decision
The fourth feature is a
consequence of the second and third features.
A court ruling which changes the
law from what it was previously thought to be operates retrospectively as
well as prospectively. The ruling will have a retrospective effect so far
as the parties to the particular dispute are concerned.
Because of the doctrine of
precedent the rights and obligations of everyone else whose case
thereafter came before a court would be decided according to the law as
enunciated by court even though the relevant events occurred before that
decision was given.
This 'retrospective' effect of a
change in the law of this nature can have disruptive and seemingly unfair
Lord Nicholls went on to
describe “Prospective Overruling”, which has never happened in the UK but
has been often considered. It has had some success in the USA and India,
and in the European Court but not elsewhere in the world.
sometimes described as 'non-retroactive overruling', is a judicial tool
fashioned to mitigate the adverse consequences.
It is a shorthand description for
court rulings on points of law which, to greater or lesser extent, are
designed not to have the normal retrospective effect of judicial
Pure Prospective Overruling,
This is most marked in criminal
cases, where 'pure' prospective overruling would leave a successful
defendant languishing in prison.
Selective Prospective Overruling,
'Selective' prospective overruling
avoids this consequence but it could see a successful defendant freed
while others in like case stayed in prison.
Pure Prospective Overruling, civil
In civil cases 'pure' prospective
overruling would hinder the development of the law by discouraging
claimants from challenging a prevailing view of the law.
simplest form prospective overruling involves a court giving a ruling of
the character sought by the bank in the present case. Overruling of this
simple or 'pure' type has the effect that the court ruling has an
exclusively prospective effect. The ruling applies only to transactions or
happenings occurring after the date of the court decision.
transactions entered into, or events occurring, before that date continue
to be governed by the law as it was conceived to be before the court gave
Other forms of prospective
overruling are more limited and 'selective' in their departure from the
normal effect of court decisions.
Selective Prospective Overruling,
'Selective' overruling, if only
the successful claimant benefits from the change, is likely to mean that
persons in like case are treated differently.
Further, it would introduce an
arbitrary element into the law. The ability to obtain an effective remedy
could depend upon which of several challenges reaches the House of Lords
Even if everyone who had already
commenced proceedings was given the benefit of the court ruling there
would still be scope for discrimination: there would be discrimination
between those who knew they might have a claim and started proceeding
post-haste and those, lacking proper advice, who were unaware they might
have a claim.
Prospective Overruling with retrospective effect
in its operation may be prospective and, additionally, retrospective in
its effect as between the parties to the case in which the ruling is
ruling may be prospective and, additionally, retrospective as between the
parties in the case in which the ruling was given and also as between the
parties in any other cases already pending before the courts. There are
other variations on the same theme.
Prospective Overruling with temporal limitation
Advocate General Jacobs suggested an even more radical form of prospective
He suggested that the retrospective and prospective
effect of a ruling of the European Court of Justice might be subject to a
temporal limitation that the ruling should not take effect until a future
date, namely, when the State had had a reasonable opportunity to introduce
new legislation: Banco Popolare di Cremona v Agenzia Entrate
Uffficio Cremona (Case C-475/03, 17 March 2005), paras 72-88.
…'declaratory' theory of Sir
William Blackstone has long been discarded. It is at odds with reality, he
Comment: This judgment hits 10 on the scale of important
decisions in recent years. The whole basis of precedent has been
All sides in the debate about judicial creativity and the judiciary’s role
in law making will now to be re-argue their case.
of this case is that many insolvencies over the past 25 years may have
been wrongly decided and could, in theory, be challenged. The main
beneficiaries will be Revenue & Customs, but a Crown statement three years
ago indicated that they would not seek to unpick earlier decisions.
Over 500 other cases have been awaiting this judgment and can now be
sorted out; the sums involved may costs banks hundreds of millions of
The House of Lords held that it had jurisdiction in certain exceptional
circumstances to depart from the normal principles relating to the
retrospective effect of court decisions, the present case was not within
that exceptional category of case in which a declaration that the
overruling was to have prospective effect only would be appropriate.
The bank argued that if the HoL was going to overrule Siebe
Gorman, it should do so only for the future and
Siebe Gorman should continue to apply to all transactions
entered into before the instant case.
Prospective overruling outside judicial
The essence of the argument
against prospective overruling was that in this country prospective
overruling was outside the constitutional limits of the judicial function
and would amount to the judicial usurpation of the legislative function.
That argument raised the issue:
Would a decision by the House of Lords on a point of law having only
prospective effect be so substantial a departure from established judicial
procedure that it should be regarded as outside the function discharged by
the judiciary under this country’s constitution?
In this country, the established practice of judicial
precedent derived from the common law. Constitutionally the judges had
power to modify that practice.
There could be circumstances in this country where
prospective overruling would be necessary to serve the underlying
objective of the courts of this country: to administer justice fairly and
in accordance with the law.
There could be cases where a decision on an issue of
law, whether common law or statute law, was unavoidable but the decision
would have such gravely unfair and disruptive consequences for past
transactions or happenings that their Lordships' House would be compelled
to depart from the normal principles relating to the retrospective and
prospective effect of court decisions.
If, altogether exceptionally, the House of Lords, as
the country’s supreme court were to follow that course their Lordships
would not regard it as trespassing outside the functions properly to be
discharged by the judiciary under this country’s constitution.
The final word on
National Westminster Bank v Spectrum  HL
However, the present case was miles away from the exceptional
category in which alone prospective overruling would be legitimate.