There are two types of precedent: binding precedents and persuasive precedents. As the names suggest, a binding precedent obliges a court to follow its decision, while a persuasive precedent can influence or inform a decision but not compel or restrict it. This system is complex and difficult to understand but it allows the law to function with consistency while retaining enough flexibility to accommodate change and development. The effective functioning of precedent requires three things. First, it needs a clear and well-defined court hierarchy, so the function and status of each court are clear. Second, it needs close adherence to the principle of stare decisis by judges and magistrates. Third, it requires a thorough system of law reporting, so that records about other decisions and precedents are available to all judges.
Binding precedent. This type of precedent is called a ‘mandatory precedent’ in some court systems. A binding precedent requires all inferior courts to follow the ratio decendi of superior courts when the facts of a case are the same or similar. Note that precedents can only be binding in the same jurisdiction, such as State court hierarchies. Precedents established in the Federal Court, for example, are not binding on court hierarchies in any of the States. Within Victoria, the Supreme Court’s Court of Appeal – being the highest court in that jurisdiction – establishes the greatest number of precedents. These precedents are binding on the Supreme Court, the County Court, the Magistrates’ Court and the various specialised courts. Precedents established in the Court of Appeal are not necessarily binding on other Court of Appeal cases, however, they are generally followed by convention. This means that Court of Appeal judges can establish a new precedent if they believe there is a pressing reason to do so.
Persuasive precedent. While the decisions of lower courts or courts in other jurisdictions can never be binding, they can certainly influence the decision of a court. Judges can examine the precedents established in these courts for guidance and information. They may study the precedent of an inferior court or a court in another hierarchy (the ratio decendi of a South Australian District Court, for example, may provide a persuasive precedent for a judge in the County Court of Victoria). Or they may develop a new precedent that is informed or shaped by these persuasive precedents. There may be no scope for a persuasive precedent if there is a binding precedent that must be applied. A court can only choose to follow a persuasive precedent if no relevant binding precedent exists in its own hierarchy.
Obiter dictum. Also worth noting is the possible impact of obiter dictum remarks on the development of a judgement. Obiter dictum (‘by the way’) statements are made in a judgement but do not constitute part of the ratio decendi, therefore they are not part of any precedent. Instead, obiter dictum remarks may provide some insight or explanation into how the judge interpreted the facts and legal principles, in order to reach his or her decision. They are not binding or persuasive precedents but can provide important information and guidance for future judges.