Freehold of properties owned by companies — Appointment of receivers of properties — Properties unoccupied for two years — Whether receivers liable for rates during that period — High Court holding that rates were unsecured debts — Receivers not liable to pay rates
On December 28 1989 two Dutch companies acquired the freehold title of adjoining office blocks known as Milton House and Shire House, Silk Street, London EC2. The purchase of the properties was financed by a syndicate of banks. LTCB acted as trustee for the banks. The moneys advanced were secured by debentures. On November 19 1993, LTCB exercised its powers under the debentures and appointed receivers of the properties. On November 21 1993 a lease of the properties to BP expired and BP delivered up possession to the companies acting by its receivers. For rating purposes the properties had been unoccupied since about July 1993 when BP went out of rateable occupation. The properties remained unoccupied.
Following their appointment the receivers, acting as agents of the companies secured the properties, oversaw repairs, employed various professional advisers and agreed to sell the properties. On February 13 1995 the properties were sold by the trustee exercising its power of sale under the debentures in order to overreach second charges against the properties. The Corporation of London asserted that the receivers were liable for unpaid non-domestic unoccupied property rates in respect of the properties for the period from November 21 1993 to March 21 1995. The companies were not in liquidation and it was common ground that the receivers had acted as agents of the companies. The trustee and the receivers applied to the court for directions.
Held The receivers were not liable to pay the rates.
1. A receiver was not, by reason only of his appointment as such, liable for unoccupied property rates where he was appointed on terms that he was the agent of the company.
2. As there could not, in general at least, be two persons in different capacities in possession at the same time a person was entitled to possession for rating purposes only if he was immediately entitled to possession.
3. The law did not regard the conduct of an administrative receiver who did not pay rent which accrued due after his appointment on a pre-receivership lease as per se unfair or unjust. The obligation to pay rates was similar; it arose out of the acquisition by the company of property prior to the receivership.
4. There was no policy reason which required the receivers to exercise their discretion to apply all money received by them in payment of rents, rates, etc under section 109(8) of the Law of Property Act 1925 in favour of the corporation: Sargent v Commission of Customs & Excise Commissioners [1995] EGCS 29 distinguished.
5. Rates accruing due after the appointment of a receiver in respect of property previously acquired by the company were not payable by the receiver as an expense of the receivership.
6. The indebtedness of the companies to the corporation was unsecured indebtedness. The receivers had no authority to pay unsecured debts. The receivers’ decision to postpone sale did not deprive the corporation of their right to have recourse against those assets and did not prejudice it. There was no suggestion that the receivers by postponing the sale did not act in the proper performance of their duties or dishonestly took a risk they were not entitled to take.
Elizabeth Gloster QC and Richard Gillis (instructed by Clifford Chance) appeared for the applicants; Christopher Lewsley (instructed by the Comptroller and City solicitor to the Corporation of London) appeared for the Corporation.