Rating surcharge on unused commercial property–Section 17A of General Rate Act 1967–Non-user exceeding six months alleged–Effect of assignment of lease during period of alleged non-user–Whether assignor ‘tried his best to let the building’–Test is the efforts to get a tenant into possession–Non-user while assignor ‘tried his best’ to be disregarded–Assignee’s non-user less than six months–Rating authority’s appeal dismissed, but leave to appeal further given
This was an
appeal by case stated from a decision of magistrates sitting at Harrow who had
held, on a complaint by the London Borough of Brent, that the respondents, Alfa
Romeo (Great Britain) Ltd, had a good defence to a demand under section 17A of
the General Rate Act 1967 (inserted by section 16 of the Local Government Act
1974) for the payment of a rating surcharge in respect of the non-use of a
commercial building for a period exceeding six months.
Charles Fay
(instructed by K B Betts, Town Clerk, Brent) appeared on behalf of the
appellants; Matthew Horton (instructed by Titmuss, Sainer & Webb)
represented the respondents.
Giving
judgment, LORD WIDGERY CJ said: This is an appeal by case stated by justices of
the peace for the Middlesex Area of Greater London sitting as a magistrates’
court at Harrow on two days in May and June 1975. On that occasion the
magistrates had before them a complaint that the respondents. Alfa Romeo (Great
Britain) Ltd, being a person duly rated and assessed by a general rate made on
March 14 1974, had failed to pay in respect of premises at 256 Water Road,
Wembley, the surcharge rate of £1,649.92 due for the period from November 11
1974 to February 22 1975. That complaint relates to a comparatively recent
innovation in the law on rating–the surcharge on unused commercial property.
One finds the provisions in section 16 of the Local Government Act 1974, which
introduced a new section in the General Rate Act 1967.
What this
section says, so far as presently material, is this:
17A If for a
continuous period exceeding six months a commercial building is not used for
the purpose for which it was constructed or has been adapted, its owner shall
pay in respect of that period (the ‘period of non-use’) a surcharge additional
to the rates (if any) payable apart from this section.
One therefore
has this conception of a surcharge payable if for a period exceeding six months
the building, being a commercial building, is not used for the purpose for
which it was constructed or adapted. This building, 256 Water Road, Wembley,
was a commercial building, a purpose-built warehouse with ancillary office
accommodation, and it stood on an industrial estate.
The
respondents, Alfa Romeo, are the English trading company for the import and
servicing of Alfa Romeo cars in Great Britain. Prior to the Alfa Romeo company
becoming owners of the building it was owned by another Italian organisation
called Italvini Ltd, an English company dealing with Italian wines. Italvini
Ltd was the owner of the building for the purposes of the rating statutes from
March 1973 until November 1974. The period of non-use which was relied upon by
the rating authority as the appellants in this case is a period from May 1974
to February 1975. It is to be observed that Italvini were owners for part of
that period, namely, from May 1974 until November 11 1974. On November 11 1974
the lease vested in Italvini was assigned to the present respondents, and they
became owners from that date. Again it becomes obvious that for a substantial
part of the period of non-use relied upon the owners were the present
respondents, Alfa Romeo. It is convenient to regard this period of non-use as
being divided into two unequal parts–one when Italvini were the owners from May
until November 1974, and the second part from November 1974 until February 1975
when the owners were Alfa Romeo (the present respondents). During the first of
those periods the material findings of the justices are that the premises were
empty. Italvini had gone out and left the premises empty Italvini was anxious,
I think I can properly say, to let the premises or to dispose of the premises
in some way so as not to have an unproductive asset. At quite an early stage
Italvini discovered that Alfa Romeo might be interested in acquiring a tenancy
of these premises because they wanted a service station in London. Through most
of 1974 one has rather desultory contacts between Italvini and Alfa Romeo on
the question of whether Alfa Romeo would take over Italvini’s lease, and in the
end a contract to that effect was made.
It is not
disputed that during the period when Italvini were owners they came within the
terms of section 17A, namely, there was a period in which a commercial building
was not used for the purpose for which it was constructed, but they contend
that they were entitled to a special defence or exemption provided in the same
section in subsection (2) where it is provided: ‘Subsection (1) of this section
shall not apply where–(a) the owner has tried his best to let the building.’
One can
usefully pause there for a moment just to remind oneself of the mischief at
which this provision was aimed. It was concerned with such notorious cases as
Centre Point where large commercial buildings were left empty, and under the
law as it then stood not contributing to general rate fund at all, while their
owners waited for a more suitable occasion upon which to put them into use. The
purpose of the legis
kind of activity, and so one finds, not surprisingly, that an owner of a
building which has been empty for a period may claim as a special defence to
the surcharge that he has tried his best to let the building.
As far as the
second half of the period is concerned–that is the period when the respondents
Alfa Romeo were owners–the situation was quite different. They made no attempt
to let the building because they wanted it for themselves. They had acquired by
assignment the lease from Italvini. They wanted the premises for themselves and
they made no attempt to dispose of them, and they set about getting the
necessary consents to use the premises as a service station. They were not
altogether successful. They did not get permission to do vehicle repairs on the
premises, but they were advised that they could set up a spares organisation
for Alfa Romeo cars without planning permission, and this they set about doing.
At what seems to have been a reasonable tempo between November 11, when
Italvini moved out, and February 22 1975, when on any view the premises were
used and occupied again, they brought racking from their other premises to set
up what I call the spares organisation and generally got the property ready for
its intended future as a spares organisation for Alfa Romeo. Here of course the
premises were not used in the active sense during the period of Alfa Romeo’s
occupation, but Alfa Romeo nevertheless sought to allege that they were using
them for the purpose of section 17A, and that was because Alfa Romeo clearly
could not claim the special defence under section 17A(2)(a), namely, that they
had tried their best to let the building. What they had to contend on their own
account was that in the period November 1974 to February 1975 they were using
the premises for the purposes for which they were constructed. They were
arguing that while the premises were being adapted for use to their new role
they would be used for the purposes for which they were constructed.
On the
argument of Alfa Romeo thus briefly summarised there was at least one
considerable difficulty in the shape of prior authority in the House of Lords.
I refer to the case of Arbuckle Smith & Co Ltd v Greenock
Corporation [1960] AC 813. I do not propose to go into the authority in
detail because in my judgment it is unnecessary finally to pronounce on any of
the important points which this authority leaves for decision at the present
day. Suffice it to say that in a closely related problem, where the question
was raised as to whether premises were occupied for a particular purpose, the
House of Lords decided that premises were not used for a particular purpose
merely because they were being prepared for use for that purpose. As I say,
that seems to me to present a very formidable difficulty to Alfa Romeo in their
primary argument, which was that they were using the premises for the
particular purposes between November 1974 and February 1975.
However, that
is not an end to the matter because Alfa Romeo had an alternative way of
putting their case. They seek in the alternative to say that the period when
Italvini were owners is to be excluded from the computation altogether. If that
is a proper argument, then at a stroke Alfa Romeo have destroyed the period of
at least six months’ non-use upon which the whole of this case turned. The way
in which Alfa Romeo set about it is this. They say: ‘The period of six months
relied upon in this case was partly when Italvini were owners and partly when
we were owners. Italvini’s period of ownership is to be totally disregarded for
present purposes by virtue of section 17A(2),’ which I have already read. The
argument is that the effect of section 17A is to exclude altogether the period
in which Italvini were the owners of the premises and thus to cut the relevant
period down to the period from November 11 1974 to February 1975, which is
demonstrably not six months. If that can be done, if that can be achieved on
the case and the statutes, in my judgment the respondents have the answer which
they want. Of course one must not overlook the fact that this is a magistrates’
case. We are not here to decide what the answer ought to be. We are here to
advise on the legal problems which were raised. The magistrates, one should
notice, with some enthusiasm decided that the defence now raised was open to
the respondents and Italvini, and therefore it is only for us to say whether as
a matter of law they were wrong in that view.
There are two
points that have to be argued to decide whether this defence is open to Alfa
Romeo. The first one is this. Section 17A, it is said, would not apply at all
to the facts of this case when the owners had sought not to let the property
but to assign an existing lease, and when that has to be considered against the
background of the statutory language that the owner has tried his best to let
the building. The argument obviously is that assigning a lease is not what one
would normally describe as ‘letting the building.’ Normally the phrase ‘to let the building’
implies ‘to create a new leasehold interest in the building.’ It is argued competently by counsel in this
case that here there is no question of the efforts of Italvini to assign their
existing lease being relevant for consideration under section 17A(2)(a) at all.
This has given us all some cause for concern. Certainly I have pondered it
considerably since the case began. But I think that this is in particular a
statute phrased in not altogether precise language where one is entitled to
take a certain amount of liberty with the specific language if it, is necessary
to do so to prevent the undoubted mischief which lies behind this legislation.
If one looks at it from that point of view the first point which comes to mind
at once is that merely letting the premises would have got nowhere in regard to
the mischief in this matter. If Italvini had sought to grant a sublease of the
premises with a view to that sub-lease being put in a drawer and forgotten and
no key of the building being turned, then the mischief behind this legislation
would not have been met at all. Merely letting the property is not enough.
Furthermore, looking at the other side of the coin, if the object to be
achieved is to get a tenant into possession, and that I believe to be the
object to be achieved here, then it matters not in the slightest whether that
tenant is a tenant by virtue of assignment or a tenant by virtue of the grant
of a sublease. It literally matters not at all. In each case a tenant is
produced and a tenant goes into the building, and the mischief is met.
For those
reasons I think that the proper approach to section 17A(2)(a) is to say that
what the owner has to plead is that he has tried his best to get a tenant into
possession. If he proves he has tried his best to get a tenant into possession,
then in my judgment he can satisfy the requirement of section 17A(2)(a). There
is no doubt whatever that if the justices had been told to approach the matter
from that point of view they would have found enthusiastically that he had done
his best to get a tenant into possession.
But that of
course is not the end of it, because although that approach justifies the
contention that the magistrates were right in holding the special defence of
section 17A(2)(a) to be available to the respondents in this case, it is still
necessary to show what the effect of that would be in our present situation.
But here I find great help from the realistic and helpful concession made by Mr
Fay that, if once we have found against him on the point that I have just been
dealing with, he would accept that the effect of setting up that successful
defence would be that the period during which Italvini were trying to let the
property would be totally disregarded for the purposes of this legislation. In
other words, one would have then to consider the period of non-use starting on
November 11 1974 and running on to February 22 1975. One would totally
disregard for all purposes what had been happening between May 1974 and
November 1974. On that footing there would be less than the six months’ period
of
appellants would fall to the ground. I think that is the right way to do it,
and I am encouraged by the fact that we are told there have been certain
changes in the law relating to these matters which produce a somewhat more
realistic basis than that upon which this case has had to be decided.
In my judgment
this appeal should be dismissed.
Agreeing,
GEOFFREY LANE LJ said: It would have been great hardship in the circumstances
of this case had the surcharge been exigible from Alfa Romeo because Alfa Romeo
have throughout, whatever else may be the case, acted with great speed and
promptness so far as they were able. What surprises me is that the appellants
have declined to exercise their undoubted powers to remit to this case.
CAULFIELD J
also agreed.
The appeal
was dismissed with costs. Leave to appeal to the Court of Appeal was granted.
