Non-domestic rates – Rates avoidance scheme – Occupation of premises – Claimant occupying commercial premises to exclusion of owner landlord as part of rates avoidance scheme – Defendant billing authority seeking rates liability order – Claimant applying for judicial review – Whether claimant occupying premises for purposes of national non-domestic rating law – Application granted in part
The main business of the claimant was occupying premises for reward on behalf of landlord commercial property owners, to the exclusion of the owner landlord and for the avowed purpose of minimising the landlord’s liability to pay national non-domestic rates (NNDR) under the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008. The defendant council was the billing authority for rating within its area. Under the regulations, NNDR was normally charged to the person entitled to possession of commercial premises, whether or not that person was in actual occupation. If the person entitled to possession was not the landlord and became the occupier of the property, the landlord was not liable for NNDR, subject to fulfilling certain temporal conditions. The claimant contracted with its customers to store items in unoccupied premises, which counted as occupation under the Regulations if it lasted for more than six weeks. That was sufficient to entitle the owner to avoid paying rates for the property for three months. An owner could seek to avoid liability by arranging a series of six-week-plus occupations, provided that not more than three months elapsed from the end of one occupation to the start of the next. The claimant’s fees were a percentage of the amount of rates saved, which the landlord would otherwise have had to pay. Issues arose whether the arrangements between the claimant and its landlord customers amounted to occupation by the claimant of the landlord’s premises for purposes of NNDR; and whether there had to be an independent business purpose, such as storage of goods for onward sale, to establish occupation.
The claimant applied for judicial review of the defendant’s decision to issue a particular summons seeking a rates liability order against it for unoccupied rates in respect of a property at Stretford Mall, Manchester. The claimant said the touchstone of occupation was volition (the exercise of the will to occupy the premises). The defendant argued that occupation for its own sake, without any separate purpose than to occupy, was not occupation in law and fact. There had to be some additional purpose for using the premises. Two other billing authorities were joined as interested parties, but did not appear before the court.
Held: The application was granted in part.
(1) There were four necessary ingredients in rateable occupation: (i) actual occupation; (ii) exclusive for the particular purposes of the possessor; (iii) possession of some value or benefit to the possessor; and (iv) possession for not too transient a period: John Laing & Sons Ltd v Kingswood Area Assessment Committee [1949] 1 KB 344 applied. There was no question here but that the transactions were genuine and produced the legal results for which they provided. The leases created a genuine relationship of landlord and tenant. The terms of service provided for a genuinely payable fee of 20% of rates saved. The modern cases on rates avoidance schemes, such as Makro Properties Ltd v. Nuneaton & Bedworth Borough Council [2012] EWHC 2250 (Admin); [2012] PLSCS 150, Secretary of State for Business Innovation and Skills v PAG Management Services Ltd [2015 EWHC 2404 (Ch); [2015] PLSCS 252 and Rossendale Borough Council v Hurstwood Properties (A) Ltd [2017] EWHC 3461 (Ch), stood for the proposition that where transactions were genuine and mean what they said, their meaning and effect, and the general law, was not to be distorted or manipulated in the name of morality, so as to prevent avoidance of rates in circumstances where the statutory provisions provide for no rates to be payable. The occupation had to be beneficial, in law and in fact, applying a morally neutral analysis. In the present case, the business of the putative occupier was the business of occupation. The purpose of the occupation was not to store goods but to plant the occupier’s flag and to populate the premises to whatever extent was required to occupy it in law and fact. If ethics and morality were excluded from the discussion, the thing of value to the possessor could be the occupancy itself. The words “occupy”, “occupation”, “occupancy” and “occupier” were ordinary English words. Their meaning had developed in case law to give them a sensible construction, but they had not been given technical statutory definitions. There was no concept within the meaning of the word “occupation” requiring a purpose or motive beyond that of the occupation itself. The question was in each case whether the four elements in the Laing case were present. The third was sufficiently present where the intention was to occupy for reward, without any further commercial or other purpose.
(2) It followed that the decision to issue the summons was founded on a wrong view of the law. It was based on the claimant being liable for unoccupied rates, not occupied rates. The defendant believed that the claimant could not be in occupation if it had no purpose for occupying beyond that of rates mitigation. However, that did not mean the decision challenged had to be quashed. It had been taken in good faith based on the view of the law set out in the defendant’s response to the pre-action protocol letter. That view of the law was not perverse, irrational or obviously ill-founded as the law was not clear from the authorities. The lawfulness of the decision was to be judged as at the time when it was taken. At that time, the defendant’s view of the law was tenable. Further, the facts relating to any of the properties in question, might be such that the claimant was found by the magistrates not to be in occupation even adopting the correct approach. A billing authority might lay informations seeking rates liability orders on a basis that was not agreed, in fact as well as in law.
Timothy Morshead QC and Luke Wilcox (instructed by Eversheds Sutherland International LLP) appeared for the claimant; Richard Glover QC and Kelly Pennifer (instructed by Greenhalgh Kerr LLP, of Wigan) appeared for the defendant; The interested parties did not appear and were not represented.
Eileen O’Grady, barrister