Anonymized Summary of Legal Opinion
Factual and Procedural Background
The Appellant purchased the freehold of a commercial property described in the rating list as two hereditaments (the Property at [Number] Main Street) on 7 June 2021. On the same date the Appellant granted a written tenancy at will of one hereditament to a charity referred to in the opinion as the Tenant; a second tenancy at will of the other hereditament was granted by a written agreement dated 9 November 2021. Nominal rents were payable under both agreements. The Appellant served copies of those agreements on the billing authority, identified here as Company A, and contended that the Tenant was "the person entitled to possession" under s.65(1) of the Local Government Finance Act 1988 (LGFA 1988) and therefore should be treated as "the owner" and liable (or eligible for relief) under s.45 (unoccupied hereditaments).
Company A disagreed. It issued rates bills to the Appellant covering the period 8 June 2021 to 2 November 2022. The Appellant did not pay and Company A commenced proceedings before the Defendant (the local magistrates' court) seeking liability orders for unpaid non-domestic rates (NDR).
At a four-day contested hearing before Judge Spruce, the district judge (on 21 March 2024) made liability orders against the Appellant. The district judge concluded, in summary: (1) the agreements failed as tenancies at law; (2) alternatively, applying the principles from Case A (the leading Supreme Court decision described in the opinion), the tenancies did not confer a real and practical entitlement to possession on the Tenant for the purposes of ss.45(1) and 65(1) LGFA 1988; (3) alternatively, the agreements were a sham; and (4) accordingly liability remained with the Appellant.
The Appellant sought judicial review in the High Court. Judge Kelly initially refused permission on the papers as the Appellant should have used an appeal by way of case stated. On renewal, Judge Klein granted permission to proceed on two limited grounds as arguable but refused permission overall on the basis that the challenges (notably the Rossendale-related argument) were not, on the material, arguable such as to justify granting relief; he concluded that even if some grounds were arguable the likely outcome would not be substantially different and refused permission under s.31(3C)/(3D) of the Senior Courts Act 1981. The Appellant obtained permission to appeal to this court on three specified grounds concerning (A) application of Case A, (B) the alleged sham, and (C) whether s.31(3D) was engaged.
Legal Issues Presented
- Whether the district judge (and consequently Judge Klein) erred in applying the legal test derived from Case A (the leading Supreme Court decision) in concluding that the Tenant did not have a "real and practical" entitlement to possession for the purposes of s.65(1) LGFA 1988, such that liability for NDR remained with the Appellant (Ground A).
- Whether the district judge erred in concluding that the tenancy agreements were a sham (Ground B).
- Whether s.31(3D) of the Senior Courts Act 1981 was engaged such that permission for judicial review should have been granted (Ground C), noting that Ground C depends upon success on Grounds A and B.
Arguments of the Parties
Appellant's Arguments
- The tenancy agreements (tenancies at will) were valid as a matter of property law and thus the Tenant was "the person entitled to possession" and therefore the "owner" for s.65(1) LGFA 1988.
- The district judge wrongly applied the "real and practical" test from Case A beyond its proper scope and should have resolved s.65(1) questions by reference to orthodox property law in the majority of cases; the "real and practical" scrutiny is, the Appellant submitted, limited to extreme or unusual cases.
- The district judge's reasoning was "bare and conclusory" and insufficiently explained why the case was "unusual".
- The judge placed undue weight on the fact the tenancies were entered into to avoid NDR and on the Appellant's redevelopment works; those matters were either irrelevant or consistent with the tenant having possession (clause 3.7 permitted landlord access, and tenancies at will are commonly temporary).
- The district judge erred in concluding the agreements were shams.
Company A and Defendant's Position (as accepted by the courts below)
- Company A contended that, as a matter of substance, the Appellant retained practical control of the property and that the tenancies at will did not confer a real and practical entitlement to possession on the Tenant for the purposes of ss.45(1) and 65(1) LGFA 1988.
- Company A relied on the redevelopment works (demolition and reconfiguration to create new units), the terms of the agreements (including absolute prohibitions on assignment/underletting and broad landlord rights of access), and the absence of evidence of the Tenant exercising occupation or organising events during the relevant period, to show the Appellant retained control and that the tenancies were entered into chiefly to avoid NDR liability.
- The Defendant (and the High Court judge on renewal) treated the Rossendale principle as applicable to determine who had the real-world control and ability to bring the property back into use, and concluded there was no arguable public law error in the district judge's application of that principle.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Case A [2021] UKSC 16 |
Interpretation applying the Ramsay principle to rate mitigation schemes; test that the "owner" for s.65(1) is the person with an immediate legal right to physical possession unless that person lacks a real and practical ability to exercise that right and the right was conferred solely to avoid NDR. |
The court analysed the scope of Case A and held it establishes a general principle (not limited to "unusual" cases): the Appellant must demonstrate the Tenant had a real and practical entitlement to possession. The district judge's application of Case A was upheld as not unlawful or irrational on the facts. |
| Case B [1982] AC 300 |
The Ramsay principle: purposive approach to statutory interpretation where transactions forming part of a pre-planned avoidance scheme may be looked at in their entirety. |
Adopted as the background principle for interpreting LGFA 1988 provisions and for assessing whether arrangements conferring legal rights were nonetheless outside the statutory description because they only served an avoidance purpose. |
| Case C [1949] 1 KB 344 |
Authoritative statement of the elements of rateable occupation (actual occupation; exclusivity for possessor's purposes; value/benefit; not too transient). |
Referred to for the principles determining occupation and who is the occupier under s.65(2). |
| Case D [2020] UKSC 21 |
Recent authority cited for the four essential ingredients of rateable occupation (supports Case C). |
Used to confirm the legal framework for determining occupation under the LGFA 1988. |
| Case E [1960] AC 813 |
Authority that a building in course of construction or alteration preventing its use for its purpose is not in rateable occupation. |
Applied as background authority for the proposition that substantial works can undermine any claim to rateable occupation for the purposes of NDR liability on occupied hereditaments. |
| Case F [2003] HKCFA 52 |
Statement endorsing purposive, realistic approach to the Ramsay line: assess whether statutory provisions were intended to apply, viewed realistically. |
Quoted in support of the purposive, realistic approach the court adopted in applying Ramsay-related reasoning to LGFA 1988. |
| R (Principled Offsite Logistics Limited) v Trafford Council [2018] EWHC 1687 |
Referenced on the question of relevance of sole purpose to avoid rates (judgment of Kerr J cited). |
The court distinguished that earlier statement (which predated Case A) and explained it did not forestall application of the Ramsay principle where appropriate. |
| Snook v West Riding Investments Limited [1967] 2 QB 786 |
Classic formulation of "sham": parties must have a common intention that documents/acts should not create the legal rights they purport to create but only appear to do so. |
Reiterated as the narrow test for establishing a sham; the court noted the distinction between sham and schemes subject to Ramsay-style purposive analysis. |
| Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991 |
Illustrates that tax avoidance can lead to genuine documents/arrangements which are not shams. |
Used to support the point that Ramsay analysis is distinct from the sham doctrine and that not all avoidance schemes are shams. |
| UBS AG v Revenue and Customs Commissioners [2016] UKSC 13 |
Discusses distinction between Ramsay principle and the concept of sham. |
Relied upon to underline that Ramsay-related purposive interpretation is independent of sham analysis. |
| Yorkshire Railway Wagon Co. v Maclure and Stoneleigh Finance Ltd. v Phillips |
Earlier authorities cited within the classic sham discussion. |
Referenced in the opinion through the Snook formulation as illustrative of sham jurisprudence; no novel application was made beyond reiteration of the principle. |
| Makro; PAG Management Services Ltd (mentioned) |
Examples of rates avoidance schemes discussed in the context of Ramsay/Case A jurisprudence. |
Referenced as part of the broader jurisprudential context; the court noted earlier commentary and distinguished pre-Case A authority where necessary. |
Court's Reasoning and Analysis
The court proceeded in several linked analytical steps, closely following the logic and authorities identified in the opinion provided:
- Scope of Case A: The court analysed whether Case A was limited to the particular SPV-type schemes it considered or whether it articulated a broader principle. The court concluded that Case A established a general interpretative rule: the "owner" under s.65(1) is ordinarily the person with the immediate legal right to physical possession, but that legal right will not identify the "owner" for NDR purposes where, in the circumstances, the person has no real and practical ability to exercise that right (especially to bring the property back into use) and the legal right was conferred solely to avoid liability for rates. The court rejected reading Case A as limited to "unusual" or SPV-only schemes and emphasised that the SPV features listed in paragraph 46 of Case A are descriptive of those schemes rather than a checklist to be applied in every case.
- Application of Ramsay principle and purposive interpretation: The court explained the Ramsay principle (Case B) and its application: a purposive and realistic view of the statutory language is required to determine whether a statutory provision applies to the transaction(s) in question. The court adopted the two-component approach from Case A — (a) identify the class of facts the statute intends to affect; (b) determine whether the facts of the case fall within that class.
- Assessment of facts against the Case A test: The court reviewed the district judge's factual findings and reasoning: the Appellant had undertaken demolition and major redevelopment works during the period of the tenancies; planning applications and tenant procurement were arranged by the Appellant; the site was secured; clause 3.7 provided an unusually broad landlord right of access; the tenancies at will contained absolute prohibitions on assignment/underletting; and there was scant credible evidence the Tenant organised events or used the premises during the relevant period. The district judge found that the redevelopment project was planned and executed by the Appellant and that the Appellant retained practical control over the property and the power to determine its occupation.
- Evaluation of the Appellant's criticisms: The court rejected the Appellant's submission that the district judge should have applied conventional property law in a manner that ends the inquiry in the Appellant's favour in ordinary cases. The court held that the district judge had correctly asked whether, in reality, the Tenant had the practical ability to determine the property's use and letting. The district judge's focus on the redevelopment works, the terms of the tenancies and the absence of evidence of genuine occupation or activity by the Tenant were held to be lawful and rational factors in reaching the conclusion that the Tenant lacked the required real and practical entitlement.
- Sham doctrine vs Ramsay analysis: The court reiterated the narrow legal meaning of a "sham" (from Snook) and that the Ramsay line of cases is concerned with purposive statutory interpretation rather than the sham doctrine. The court noted that an arrangement may be a genuine legal arrangement (i.e., not a sham) yet still fall outside the statutory description for the purposes of NDR liability because it was created solely to avoid liability and did not confer real-world control.
- Permission and s.31(3C)/(3D): The court accepted the High Court's approach in treating whether permission should be granted in light of s.31(3C)/(3D), observing that even if some grounds were arguable, the likely outcome would not differ because the central Rossendale issue was unarguable on the facts. Thus permission to apply for judicial review was properly refused.
Holding and Implications
APPEAL DISMISSED
Holding: The court dismissed the Appellant's appeal and upheld the decision of Judge Klein refusing permission to apply for judicial review of the liability orders made by Judge Spruce on 21 March 2024. The court found Ground A (misapplication of Case A) to be wholly unarguable on the material; Ground B (sham) was not reached for final decision in light of Ground A; and Ground C (engagement of s.31(3D)) did not arise given the failure of Grounds A and B.
Implications: The decision affirms that the test in Case A is a general purposive inquiry: a person with a legal right to possession will usually be the "owner" for s.65(1) LGFA 1988, but that right will not suffice where, considered realistically, the person lacks a real and practical ability to exercise the right and the right was conferred solely to avoid rates. On the facts of this case — notably the Appellant's redevelopment works, the terms of the tenancies at will, and the absence of evidence of the Tenant exercising occupation or control — the courts below were entitled to conclude the Appellant retained practical control and liability for NDR. The court recorded that no public law error in the district judge's reasoning was shown and that the likely outcome would not have been different even if limited arguable legal errors were identified.
Disposition
The appeal is dismissed. The High Court's refusal of permission to apply for judicial review is upheld, and the liability orders made by the Defendant on 21 March 2024 remain in force.
Administrative and Authorship Notes
This summary is based exclusively on the text of the provided opinion. All identifiable parties, entities and locations have been anonymized consistently (for example, the billing authority is labelled "Company A", the tenant is "Tenant", the Appellant is "Appellant", the magistrates' court is "Defendant", and judicial office-holders are referenced as "Judge [Last Name]"). No facts or legal conclusions beyond those contained in the opinion have been added.