Real and Practical Entitlement to Possession: General Application of the Rossendale Principle in Non‑Domestic Rating – Commentary on Emeraldshaw Ltd v Sheffield Magistrates’ Court [2025] EWCA Civ 1601

Real and Practical Entitlement to Possession: General Application of the Rossendale Principle in Non‑Domestic Rating

Commentary on Emeraldshaw Ltd, R (On the Application Of) v Sheffield Magistrates' Court [2025] EWCA Civ 1601

1. Introduction

1.1. Overview

This Court of Appeal decision concerns the liability to pay non‑domestic rates (“NDR”) on unoccupied commercial property and, in particular, the effect of the Supreme Court’s reasoning in Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16; [2022] AC 690 (“Rossendale”). The key question is how far the “real and practical entitlement to possession” test developed in Rossendale, rooted in the so‑called “Ramsay principle” of purposive statutory construction in tax and rating cases (WT Ramsay Ltd v IRC [1982] AC 300), applies beyond the specific SPV/liquidation schemes examined in that case.

The Court of Appeal holds that the Rossendale test is of general application to the interpretation of “owner” in section 65(1) of the Local Government Finance Act 1988 (“LGFA 1988”), and not limited to “extreme”, “abusive” or “unusual” rate‑mitigation schemes involving company or insolvency law. It also confirms that, even where a tenancy is valid as a matter of property law and not a sham, that does not automatically make the tenant the “owner” for NDR purposes. The decisive question remains who has the real and practical ability to bring the property back into use and who enjoys real control of the premises.

1.2. Parties

  • Appellant: Emeraldshaw Ltd – the freehold owner of a warehouse and office complex known as Minit House, Sheffield.
  • Defendant: Sheffield Magistrates’ Court – which had made liability orders against Emeraldshaw for unpaid NDR.
  • Interested Party: Sheffield City Council (“SCC”) – the billing authority responsible for levying and collecting NDR.
  • Non‑party in substance: Space to Help (Yorkshire) (“STHY”) – a putative charitable tenant under tenancies at will, relied upon by Emeraldshaw as the party allegedly “entitled to possession” and so the “owner” under s.65 LGFA 1988.

1.3. The rating scheme and alleged mitigation arrangement

The property, Minit House 1, Orgreave Way, comprised two hereditaments on the NDR list as at June 2021, both unoccupied and subject to liability for rates under s.45 LGFA 1988 (unoccupied hereditaments). Emeraldshaw acquired the freehold on 7 June 2021 and, on the same day and again on 9 November 2021, granted STHY tenancies at will over each of the two units at nominal rent.

Emeraldshaw’s case was that STHY thereby became “the person entitled to possession” of each hereditament within s.65(1) LGFA 1988 and thus “the owner” liable for any unoccupied property rates under s.45. Because STHY was said to be a charity, Emeraldshaw further argued that the unoccupied property charity relief (then in s.45A LGFA 1988) meant that no NDR was in fact payable.

SCC rejected that analysis. It treated Emeraldshaw as the “owner” and issued rates bills for the relevant period (8 June 2021 – 2 November 2022). When Emeraldshaw did not pay, SCC commenced liability order proceedings in the magistrates’ court. A core feature of the factual matrix was that, during the currency of the tenancies at will, Emeraldshaw carried out substantial demolition and redevelopment works, turning the two hereditaments into four new units, later let to new commercial tenants.

1.4. Procedural history

  1. Magistrates’ Court (DJ Spruce): After a 4‑day contested hearing, the district judge made liability orders against Emeraldshaw. He held, in the alternative:
    • (1) As a matter of property law, the agreements did not create valid tenancies, so STHY never became entitled to possession of the hereditaments.
    • (2) Alternatively, applying Rossendale, even if the tenancies were valid, STHY did not gain a “real and practical” entitlement to possession; Emeraldshaw remained the “owner” under ss.45 and 65 LGFA 1988.
    • (3) Alternatively again, the tenancies were a sham.
  2. Judicial review in the High Court (HHJ Klein):
    • Held: ground that the tenancies were invalid as a matter of property law was arguable; and a particular complaint about burden of proof on sham was arguable.
    • However, the Rossendale ground – that the district judge misapplied the “real and practical” entitlement test – was held not arguable. The judge affirmed that Emeraldshaw, not STHY, had real control of the property.
    • Applying s.31(3C)–(3D) Senior Courts Act 1981, he held it was highly likely that the outcome (liability orders) would have been the same, even if the arguable errors had not occurred. On that basis he refused permission for judicial review.
  3. Court of Appeal: Stuart Smith LJ granted permission to appeal on three grounds (A: Rossendale test; B: sham; C: application of s.31(3D) SCA 1981). The Court of Appeal’s task was not to decide the substantive NDR liability, but to determine whether Emeraldshaw should have been granted permission to seek judicial review of the magistrates’ decision.

2. Summary of the Judgment

2.1. The issues on appeal

The Court of Appeal considered three grounds:

  • Ground A – The Rossendale issue: Was it arguable that the district judge misapplied Rossendale in concluding that STHY was not “entitled to possession” within s.65(1) LGFA 1988 and that Emeraldshaw remained the “owner” liable for rates on the unoccupied property?
  • Ground B – The sham issue: Was it arguable that the district judge erred in concluding (in the alternative) that the tenancy agreements were shams?
  • Ground C – Section 31(3D) SCA 1981: Was it arguable that the “no substantial difference” limb in s.31(3D) applied, such that the High Court should have refused permission for judicial review even if there were errors below?

The appellant accepted that Ground C only arose if Grounds A and B were both arguable. The focus of submissions, and of the Court of Appeal’s reasoning, was firmly on Ground A – the scope and effect of Rossendale.

2.2. The Court’s holding in outline

The Court of Appeal:

  • held that Ground A (Rossendale misapplication) was wholly unarguable (paras 72, 82);
  • concluded that, on the district judge’s unimpeachable factual findings about demolition, redevelopment and control, STHY did not have a real and practical entitlement to possession of the property for NDR purposes – Emeraldshaw remained the “owner”;
  • observed that the sham issue (Ground B) therefore did not arise for determination, but provided guidance on the narrow concept of “sham” and its separation from the Ramsay/Rossendale approach (paras 83–85); and
  • held that Ground C (s.31(3D) Senior Courts Act 1981) necessarily failed in light of the conclusion on Ground A (para 86).

The appeal was dismissed and the High Court’s refusal of permission to apply for judicial review was upheld (paras 87–89).

2.3. Key legal conclusions

  1. General applicability of the Rossendale test (paras 30–47, 72–80):
    • The Court affirms that Rossendale is not confined to “extreme” or “unusual” rate‑avoidance schemes involving SPVs and abuse of company/insolvency procedures.
    • The correct principle (para 43) is that the “owner” in s.65(1) is normally the person with the immediate legal right to possession, unless that person has no real or practical ability to exercise that right (in particular, to bring the property back into use) and has been given that right solely to avoid liability for NDR.
  2. Rejection of “unusual case” filter and checklist approach (paras 44–47, 72–79):
    • There is no legal requirement that a case be “unusual” before the Rossendale test applies; “ordinary/unusual” in Rossendale was descriptive, not a jurisdictional threshold.
    • The six features of the SPV schemes identified in Rossendale at [46] are not a checklist for future cases.
    • The final sentence of Rossendale [49] referring to abuse of company/insolvency law is illustrative and a fortiori, not a limiting condition of the rule.
  3. Application to the Emeraldshaw/STHY tenancies at will:
    • Given the broad rights of entry and control retained by Emeraldshaw (notably clause 3.7), the prohibition on subletting/assignment, the extensive demolition and redevelopment of the premises during the tenancy, and the lining up of new commercial tenants by Emeraldshaw, the district judge was entitled to find that STHY had no real and practical entitlement to possession (paras 56–66, 76–78).
    • On those findings, Emeraldshaw (as freeholder) remained “the owner” for NDR purposes between 8 June 2021 and 2 November 2022, and so the liability orders were correct in law.
  4. Clarification of the sham concept (paras 83–85):
    • The Court reiterates the classic Snook definition of a sham: the parties share a common intention that a document appear to create rights and obligations which they do not in fact intend to create.
    • The Ramsay/Rossendale purposive approach does not depend on proving sham; genuine transactions entered into solely for tax avoidance can still be re‑characterised (or steps disregarded) for statutory purposes, even though they are not shams.

3. Statutory and Doctrinal Framework

3.1. Liability for occupied and unoccupied hereditaments

3.1.1. Occupied hereditaments – s.43 LGFA 1988

Section 43 LGFA 1988 governs liability for NDR on occupied hereditaments. In essence:

  • where a hereditament is shown in a local non‑domestic rating list, “a person who is in occupation of all or part of” it is liable for NDR for each chargeable day (s.43(1), (7));
  • the amount payable is generally the rateable value multiplied by the relevant national multiplier (formerly s.43(4), now Sch.4ZA).

3.1.2. Unoccupied hereditaments – s.45 LGFA 1988

Section 45 applies where the hereditament is unoccupied. The essential conditions include (para 25):

  • the hereditament appears in the local rating list;
  • it falls within a class prescribed by regulations;
  • none of it is occupied; and
  • the person is the “owner” of the whole hereditament (s.45(1)(b)).

Where s.45 applies, the charge broadly mirrors the occupied charge (now by Sch.4ZB), but the reliefs differ significantly. Of particular relevance:

  • a charity can obtain 100% relief on an unoccupied hereditament (s.45A; later Sch.4ZB), if it appears the property will next be used wholly or mainly for charitable purposes (para 8);
  • by contrast, for occupied premises a charity normally only obtains 80% mandatory relief (s.43(5)–(6)), with any further relief discretionary.

This asymmetry creates a powerful incentive for “charity leasing” schemes designed to shift liability for unoccupied rates to a charitable tenant who can invoke 100% relief – precisely the context of Emeraldshaw’s arrangement with STHY.

3.2. Definition of “owner” and “entitled to possession” – s.65 LGFA 1988

Section 65(1) LGFA 1988 provides the key definitional provision:

“The owner of a hereditament or land is the person entitled to possession of it.”

Section 65(2) preserves the traditional case‑law rules about “occupation”, by importing the jurisprudence from the General Rate Act 1967. Consistently with previous authority, the Court of Appeal summarises the four elements of rateable occupation (para 28):

  1. actual occupation;
  2. exclusive occupation for the particular purposes of the possessor;
  3. occupation of some value or benefit to the possessor; and
  4. occupation that is not too transient.

In relation to property under construction or undergoing substantial alteration such that it cannot be used for its intended purpose, case law (e.g. Arbuckle Smith & Co Ltd v Greenock Corporation [1960] AC 813) indicates there is no rateable occupation for s.43 purposes (para 29). In Emeraldshaw, that doctrine is background: the property was being demolished and reconfigured during the alleged tenancy period, which reinforces the Court’s conclusion that STHY could not realistically occupy or use the premises.

3.3. The Ramsay principle

The judgment offers a concise and authoritative description of the Ramsay principle (paras 34–38), originally developed in tax cases but now of general applicability where statutory charges or reliefs are manipulated by intricate schemes.

Key features:

  • It is not an anti‑avoidance doctrine based on morality; it is a general rule of statutory construction (para 37, adopting Ribeiro PJ in Arrowtown).
  • The court must:
    1. Construe the statutory provision purposively to identify the class of facts or transactions to which it was intended to apply.
    2. Then examine the actual facts “viewed realistically” to see whether they answer the statutory description (paras 37–38).
  • Where a series of pre‑planned steps are designed to produce a particular tax/result, the court may consider the scheme as a whole, not each step in isolation (paras 12–13).
  • A transaction is not invalid merely because it was motivated by tax avoidance (para 35). However, where elements have no business or real‑world purpose other than avoidance, those elements may be disregarded or re‑characterised for the purposes of the statute.

In Rossendale and Emeraldshaw, Ramsay is applied to the interpretation of “entitled to possession” in s.65(1) LGFA 1988, as the “badge of ownership” triggering liability for NDR.

4. The Rossendale Decision and Its Restatement

4.1. The schemes in Rossendale

Rossendale concerned two specific rate‑mitigation schemes involving:

  • the creation by the property owner of a Special Purpose Vehicle (“SPV”) with no assets or real business;
  • the grant of short leases of empty properties to the SPV at a time when unoccupied rates would otherwise fall on the owner; and
  • placing the SPV either into:
    • members’ voluntary liquidation (and relying on an exemption from rates during winding‑up); or
    • dissolution, so that the lease vested in the Crown as bona vacantia, with a delay before disclaimer.

The schemes were agreed to be genuine as a matter of property law (no sham) and to have no business or “real world” purpose beyond avoiding NDR (para 33).

4.2. Purpose of the unoccupied rating regime

The Supreme Court’s starting point was to identify Parliament’s purpose in imposing NDR on unoccupied hereditaments (paras 39–40 of the Court of Appeal judgment, reflecting Rossendale):

  • to discourage owners from leaving properties empty for their convenience or financial advantage;
  • to encourage bringing empty property back into use, for the benefit of the community; and
  • to focus liability on the person who is, in reality, able to put the property into occupation (para 40, quoting Rossendale [30]).

The structure of the exemptions also reflects this purpose: exemptions exist where the owner cannot reasonably bring the property into use, or has a legitimate excuse, or is making some other valuable contribution to society (para 39).

4.3. The “real and practical entitlement to possession” test

At the heart of Rossendale, and now Emeraldshaw, is the construction of “entitled to possession” in s.65(1). The Supreme Court held (and the Court of Appeal endorses) that:

  • In a normal case, the “owner” is the person with the immediate legal right to actual physical possession of the property (para 41, reflecting Rossendale [47]).
  • However, that legal right is a means of locating the person who, in the “real world”, controls whether the property remains unoccupied, and so can be incentivised by the rates regime (paras 40–41).
  • Accordingly, the statutory phrase “entitled to possession” is construed as concerned with a real and practical entitlement, i.e. the ability either to occupy the property or confer a right of occupation on someone else, and so to decide whether to bring it into occupation (Rossendale [59]; cited at para 47).

The Court of Appeal in Emeraldshaw captures the ratio of Rossendale in para 43:

“[…] the ‘owner’ of a hereditament for the purposes of s.65(1) of the LGFA 1988 is the person who has the immediate legal right to actual physical possession of that property, unless, in the circumstances of the case, he or she has no real or practical ability to exercise that right, so as to bring the property back into use, and has only been granted that right for the purpose of avoiding liability for NDR.”

4.4. Misreadings of Rossendale corrected

4.4.1. No “unusual case” gateway

The Court of Appeal notes that practitioners and some lower courts had been treating Rossendale as applicable only in “unusual” or “extreme” cases (para 44). This had generated:

  • arguments about whether a particular fact pattern was sufficiently “unusual” to engage Rossendale; and
  • a tendency to leave “ordinary” landlord‑tenant situations untouched by the real and practical entitlement analysis.

The Court holds that this is a misreading of Rossendale. The references to “ordinary” and “unusual” in the Supreme Court’s judgment were merely descriptive: it is “self‑evident” that legal entitlement normally corresponds to real/practical ability, and that cases where it does not will be unusual; but that does not create a doctrinal threshold (paras 44, 72).

4.4.2. No requirement of abuse of company or insolvency law

Some had argued that Rossendale only applies where the scheme involves an abuse of company law or insolvency procedures. Reliance was placed on the last sentence of Rossendale [49], where the Supreme Court referred to entitlements created with the aim of acting unlawfully and abusing such procedures.

The Court of Appeal firmly rejects this: the reference in that sentence is a fortiori, not a limitation. Parliament “still less” intended to treat as owner a company used to abuse those procedures; but the primary proposition is broader (para 45):

“The last sentence of [49] simply emphasises a fortiori that the SPV schemes in Rossendale fell outside the proper scope of an entitlement to possession […] That is clear from the opening words ‘Still less…’.”

4.4.3. The six features at [46] of Rossendale are not a checklist

The Court also addresses another misreading: that the six characteristics of the SPV schemes listed at [46] in Rossendale form a binding checklist to be satisfied before a tenant can be denied “owner” status.

This is rejected as inconsistent with the structure of the Ramsay approach (paras 46–47):

  • The six features were simply a fact‑specific application of the purposive construction of s.65(1) to the particular schemes in Rossendale.
  • Their role was evidential and illustrative, not normative; they are not “criteria” for all cases.

5. Application to Emeraldshaw’s Tenancies at Will

5.1. The tenancy terms

The two tenancies at will granted to STHY (7 June and 9 November 2021) were in substantially identical form (paras 48–53). Notable provisions included:

  • Permitted use (clause 1): broad – “office or warehouse or storage or event space or for charitable events” or any use permitted by the landlord (para 49).
  • Tenancy at will (clause 2): commenced on the agreement date; terminable at any time by either party on notice (paras 50, 64).
  • No alienation (clause 3.2): an absolute prohibition on assigning, underletting, charging, parting with or sharing possession, or otherwise disposing of the demised premises (para 51).
  • Maintenance (clause 3.3): obligation to keep the property clean and tidy and repair damage caused while in occupation, but specifically no obligation when “out of occupation” (para 52).
  • Landlord’s right of entry (clause 3.7): unusually broad access:
    “The tenant shall allow the Landlord (and all others authorised by the Landlord) to enter the Property at any reasonable time for the purpose of ascertaining whether the terms of this agreement are being complied with and for any other purposes connected with the Landlord's interest in the Property.” (para 53, emphasis added)

Emeraldshaw relied heavily on clause 3.7 to justify its extensive presence on the site for demolition and redevelopment works during STHY’s alleged tenancy (paras 56–61, 74–78).

5.2. Factual findings about control, works and use

The district judge’s findings, which the Court of Appeal holds to be unimpeachable in public law terms, may be summarised as follows:

  • Redevelopment project:
    • Emeraldshaw applied for planning permission to demolish an office building and undertake extensive alterations and refurbishment shortly after acquiring the freehold (para 57).
    • Demolition was timetabled for September–November 2021; further extensive renovation applications followed (para 57).
    • By 3 November 2022 the original two hereditaments had been demolished/reconfigured into four units; Emeraldshaw had lined up new commercial tenants and granted them occupation leases after terminating STHY’s tenancies (paras 56–57, 61, 64–65).
    • The site was physically secured by steel fencing from 14 September 2021 (para 58).
  • Lack of charitable use:
    • The evidence of any charitable events was extremely thin. One alleged food bank event was in July 2023, after the relevant charging period, and so irrelevant (para 62).
    • The purported book event in September 2022 was found unsupported and the sparse evidence appeared to be manufactured ex post facto (para 62).
    • The judge found as a fact that STHY never held any events at the premises during the relevant period and that Emeraldshaw had not produced any evidence from STHY of any use of the property (para 62).
  • Control and “owner” in reality:
    • Emeraldshaw controlled the redevelopment timetable, works and future lettings.
    • The nature and extent of demolition and construction works were “manifestly inconsistent” with STHY enjoying exclusive possession (para 60).
    • There was no evidence that STHY had been consulted about the works or had any say in the project (para 60–62).
    • There was “no proper evidential basis” to conclude the tenancies were granted to allow STHY to use the premises or to play any role in bringing them back into use (para 66(iii)).
    • The judge found that STHY had no real interest in what happened to the property; Emeraldshaw retained practical control and the ability to decide whether the premises were brought into occupation (para 65–66(iv), (vi)).

The Court of Appeal emphasises that the redevelopment lasted for essentially the same period as STHY’s tenancies and that the works were funded and directed by Emeraldshaw (para 77). The premises under tenancy were in fact in the process of being demolished and reconstructed; STHY had no real-world opportunity or power to occupy them or to enable others to do so.

5.3. The Court’s response to Emeraldshaw’s arguments on Ground A

5.3.1. Mischaracterisation of the Rossendale test

Emeraldshaw argued (para 68) that the district judge erred by:

  • treating Rossendale as requiring a broad “holistic” enquiry into the reality of control in all cases; and
  • failing to recognise that in the “large majority” of cases ownership under s.65(1) is determined simply by applying property law rules on entitlement to possession.

The Court of Appeal rejects that characterisation. The district judge did not disregard property law; he started from it, but then asked the critical Rossendale question: did STHY in reality have the practical ability to determine what happened to the property, including control over letting and bringing it into use? (para 73). That is exactly the exercise required by the purposive/Ramsay construction.

5.3.2. The role of tenancies at will and control

The Court accepts (para 64) that tenancies at will are, by definition, insecure and normally suitable for short‑term use. However, the legal form of a tenancy at will does not settle the Rossendale question. Here, when the tenancies at will are viewed against:

  • the demolition and reconstruction works undertaken by Emeraldshaw;
  • the steel fencing and physical securing of the site;
  • the structuring of future commercial lettings by Emeraldshaw; and
  • the wide landlord’s rights of entry “for any purposes connected with the Landlord’s interest” (clause 3.7),

the Court holds that there was more than ample basis to conclude that STHY lacked any real and practical capacity to occupy or control the premises (paras 76–78).

The Court notes that the ability of STHY also to terminate the tenancies at will does not assist Emeraldshaw (para 77). Termination by STHY would only extinguish STHY’s own interest; it would not bring about occupation. By contrast, Emeraldshaw’s control of redevelopment and letting meant that only Emeraldshaw could practically bring the property into occupation.

5.3.3. Sole purpose of avoiding NDR

Emeraldshaw further argued that it was improper for the judge to place significant weight on his finding that the sole purpose of the tenancies was to avoid NDR, and sought support from R (Principled Offsite Logistics Ltd) v Trafford Council [2018] EWHC 1687 (Admin) (para 71(1), 81).

The Court of Appeal dismisses this:

  • The Principled Offsite dictum was pre‑Rossendale and did not address the Ramsay principle as applied to NDR (para 81).
  • The finding that the arrangements had no purpose other than avoidance was not an improper appeal to morality; it is an integral part of the Rossendale test as restated in para 43 (para 80).
  • The district judge did not stop at motive; he also found that STHY had no real or practical ability to exercise any right of possession or to bring the property into use.

5.4. The Court’s overall assessment on Ground A

In paras 76–78, the Court of Appeal strongly endorses the district judge’s approach:

  • The judge was entitled, indeed required, to view the tenancies in the context of the demolition and redevelopment scheme, the timing and extent of works, planning applications and evidence of control over future lettings.
  • On that evidence, it would be difficult to see how any rational judge could have concluded that STHY had a real and practical entitlement to possess and control the property (para 78).
  • The district judge’s references to “unusual features” or analogies with SPVs were not necessary to his ratio and, in any event, did not undermine the lawfulness of his reasoning (para 79).

Ground A – contending that it was arguable that Rossendale was misapplied – was therefore held to be “wholly unarguable” (para 82).

6. Sham, Ramsay and Their Relationship (Ground B)

6.1. The narrow concept of sham

Although the sham ground did not need to be determined (given the failure of Ground A), the Court took the opportunity to restate the law for the benefit of lower courts and litigants (paras 83–85).

Drawing on Snook v West Riding Investments Ltd [1967] 2 QB 786, 802 (Diplock LJ), the Court restates the classic definition:

“[F]or acts or documents to be a ‘sham’ […] all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.” (para 84, summarising Snook)

The Court also cites Rossendale itself (para 36 there; para 84 here):

“For a transaction or document to be characterised as a sham in English law, it is necessary to show that the parties intended that the transaction or document should not actually create legal rights and obligations but should merely appear to do so, with the object of deceiving third parties.”

Two key consequences follow:

  • “Tax avoidance is the spur to executing genuine documents and entering into genuine arrangements” (para 85, adopting McGuckian and UBS), i.e. arrangements can be motivated solely by avoidance yet still be legally effective and not a sham.
  • To establish a sham, it is not enough that the parties’ purpose is avoidance, nor that the documents are highly artificial; what is required is a shared intention that the apparent legal rights and obligations should not in fact bind them.

6.2. Distinction between sham and Ramsay/Rossendale analysis

The Court underscores an important conceptual separation:

  • The sham doctrine concerns whether the parties truly intend the legal rights and obligations that their documents purport to create.
  • The Ramsay/Rossendale approach concerns whether, as a matter of statutory interpretation, those genuine rights and obligations fall within the statutory concepts (such as “owner”, “entitled to possession”, “transaction”, “distribution”, etc.) once the statute is read purposively and the facts are viewed realistically.

As the Court notes (para 85), in Rossendale the leases were “not shams and created genuine legal rights and obligations”, yet the Supreme Court still held that, for the purposes of s.65(1) LGFA 1988, the SPVs were not “owners” because they lacked a real and practical entitlement to possession.

In other words, the billing authority does not need to prove sham to succeed under Rossendale. Even wholly genuine, non‑sham arrangements can be held not to satisfy the statutory description if they confer no real and practical ability to bring the property into occupation and exist solely for avoidance.

7. Ground C – “No Substantial Difference” under s.31(3D) SCA 1981

Section 31(3C)–(3D) of the Senior Courts Act 1981 allows the High Court to refuse relief on a judicial review application if it appears to the court to be highly likely that the outcome would not have been substantially different had the complained‑of conduct not occurred.

In the High Court, HHJ Klein had applied this provision, holding that:

  • Even if the magistrates’ court had erred on whether the tenancies were valid in property law terms and on aspects of the sham analysis, Emeraldshaw would still have been the “owner” under s.65(1) when Rossendale was properly applied (para 17).
  • It was therefore highly likely that the liability orders would have been made in any event.

On appeal, Ground C depended on both Ground A (Rossendale) and Ground B (sham) being arguable (para 22, 86). As the Court of Appeal found Ground A wholly unarguable, it did not need to address the detail of s.31(3D). Ground C thus failed automatically (para 86).

8. Simplifying Key Legal Concepts

8.1. Hereditament

A hereditament is a unit of property which can be separately rated for non‑domestic rating purposes – essentially, a unit of rateable occupation capable of separate assessment (e.g. a warehouse, a floor of an office building, a shop).

8.2. Tenancy at will

A tenancy at will is a highly informal, precarious form of occupation:

  • It continues “at the will” of both parties and may be terminated at any time by either party without notice (unless the contract stipulates a method of notice).
  • It confers no security of tenure and is commonly used as a short‑term holding arrangement, e.g. pending the negotiation of a formal lease.
  • Because it is so fragile, it can be used in rating schemes to assert that a charity or third party is the “entitled to possession” tenant, while enabling the landlord to retake occupation instantly when commercially convenient.

8.3. “Person entitled to possession”

At common law, the “person entitled to possession” is the person who has the immediate legal right to occupy or exclude others from the property – broadly, the current freeholder or tenant (depending on the lease structure).

In the rating context, following Rossendale and Emeraldshaw, this phrase is now read as:

  • normally coinciding with the person having the immediate legal right to possession; but
  • subject to a reality check: does that person have a real and practical ability to occupy, to allow others to occupy, and to bring the property into use? If not, and if their legal right was conferred solely to avoid NDR, they will not be treated as “owner” for s.45 purposes.

8.4. Sham

A transaction is a sham if:

  • the parties agree on documentation or ostensible acts which purport to create certain rights or obligations;
  • but they secretly intend that these rights/obligations will not in fact bind them as they appear; and
  • they do this to mislead third parties or the court.

By contrast, many tax/rating avoidance arrangements are perfectly genuine: the parties intend to be bound by the documents, but those documents are structured in a way that exploits statutory language. Such arrangements can still be challenged under Ramsay/Rossendale without proving sham.

8.5. Ramsay principle and purposive interpretation

The Ramsay principle means that, when applying a tax or rating statute:

  • the court seeks to identify the purpose of the provision;
  • then examines the real world facts, including all pre‑planned steps, to see whether the situation truly fits the statutory concept;
  • elements of a scheme having no real business purpose other than avoidance may be disregarded in that assessment.

In Emeraldshaw, this manifests in treating “entitled to possession” as requiring real and practical power over occupancy, not just a paper tenancy that is inconsistent with the actual control and use of the property.

9. Impact and Significance

9.1. Clarifying and broadening Rossendale

Emeraldshaw is a significant appellate authority because it:

  • Explicitly rejects attempts to confine Rossendale to “extreme” SPV/liquidation schemes (paras 30–47, 72);
  • confirms that the “real and practical entitlement” test applies generally to the interpretation of “owner” in s.65(1) LGFA 1988;
  • clarifies that there is no threshold requirement of an “abuse” of company/insolvency law or a set of “criteria” replicating the six features in Rossendale [46] (paras 44–47).

For future NDR disputes, billing authorities and courts are now clearly entitled – indeed obliged – to:

  • look beyond the mere existence of a lease or tenancy at will; and
  • consider who in reality controls redevelopment, occupation, letting and the ability to bring the property into use.

9.2. Consequences for charity‑based and other mitigation schemes

The factual pattern in Emeraldshaw is representative of a broad class of schemes where:

  • a landlord grants a short or flexible tenancy (often at nominal rent) to a charitable or non‑profit entity;
  • the entity is then said to become “owner” for s.65 purposes, allowing charitable relief to zero out the unoccupied rates;
  • meanwhile, the landlord retains practical control over redevelopment, marketing, and grant of “real” commercial leases when the market allows.

Post‑Emeraldshaw, such schemes will face much greater scrutiny. Authorities will be able to argue that:

  • where the charity does not in reality use, occupy or control the property; and
  • where the landlord undertakes or controls substantial works and future lettings; and
  • where the arrangement has no genuine purpose beyond non‑domestic rating mitigation;

then, under Rossendale as clarified by Emeraldshaw, the charity is not the “owner” and cannot claim to shift liability or obtain relief. The freeholder (or other substantive controller) remains liable as the real “owner”.

9.3. Guidance for lower courts and practitioners

The judgment provides practical guidance to magistrates, the Valuation Office Agency, and rating practitioners:

  • Fact‑sensitivity: Courts must undertake a realistic evaluation of:
    • who plans and pays for works;
    • who deals with planning permissions and contractors;
    • who negotiates with future occupiers; and
    • what, if any, use is actually made of the property by the alleged tenant.
  • Evidence of use and control: Parties relying on charitable or other mitigation tenancies must be prepared to show real activities – events, operations, or genuine control – during the relevant rating period, not merely ex post facto documentation.
  • No safe harbour in legal form: The mere existence of a valid lease (including a tenancy at will), coupled with charity status and correct formalities, will not be sufficient if in substance control and benefit remain with the landlord.

9.4. Relationship with tax avoidance jurisprudence

Emeraldshaw reinforces the mainstream of modern UK tax and rating cases:

  • Ramsay, McGuckian, UBS and Rossendale collectively show a continuous trend away from hyper‑literalism and towards purposive interpretation grounded in economic and practical reality.
  • The commentary on Principled Offsite Logistics (para 81) warns against selective reading of pre‑Rossendale dicta that might encourage formalistic or morality‑based reasoning instead of purposive construction.
  • The judgment re‑emphasises that statutory anti‑avoidance is not about punishing “immoral” behaviour, but about reading tax/rating statutes in a way that gives genuine effect to Parliament’s objectives.

10. Conclusion

Emeraldshaw is an important clarification of the law on liability for unoccupied non‑domestic rates and the meaning of “owner” under s.65(1) LGFA 1988. Building on Rossendale, the Court of Appeal confirms that:

  • “Owner” means, in substance, the person with a real and practical entitlement to possession, capable of occupying the property or granting occupation to others, and thereby deciding whether to bring it into use.
  • This test applies generally, not only to exotic SPV or insolvency‑based schemes.
  • A person who holds a bare legal entitlement for no purpose other than avoiding NDR, and who cannot in reality control occupation, does not fall within the statutory concept of “owner”.
  • The concept of “sham” remains narrow and is not a prerequisite to the application of Ramsay/Rossendale.

On the facts, Emeraldshaw’s extensive demolition and redevelopment of Minit House, its retention of control over planning and future leases, and the complete lack of real use or control by STHY, meant that STHY could not credibly be said to have any real and practical entitlement to possession. The Court therefore upheld the finding that Emeraldshaw remained liable for unoccupied rates as “owner” and dismissed the appeal.

For future cases, Emeraldshaw sends a clear message: where non‑domestic rating mitigation schemes place a nominal tenant between the freeholder and the property, courts will look beyond the façade of legal form to the practical realities of control, use, and purpose. If those realities do not align with Parliament’s intention to incentivise bringing property back into use, the owner in law will remain the owner in rating.

Case Details

Year: 2025
Court: England and Wales Court of Appeal (Civil Division)

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