Hurstwood Properties (A) Ltd and Others v Rossendale Borough Council and another
| Jurisdiction | England & Wales |
| Neutral Citation | [2021] UKSC 16 |
| Year | 2021 |
| Court | Supreme Court |
2020 Oct 26; 2021 May 14
Rating - Non-domestic rates - Unoccupied hereditament - Owners of unoccupied hereditaments seeking to avoid liability to non-domestic rates by leasing hereditaments to companies which were then wound up or struck off register of companies - Whether companies becoming “owners” of hereditaments for purposes of rating statute - Whether court able to pierce corporate veil of companies -
The defendants in two separate cases were the registered owners of a number of unoccupied commercial properties on which non-domestic rates were payable by the “owner of the hereditament” within section 45(1)(b) of the Local Government Finance Act 1988F1, defined in section 65(1) of the Act as “the person entitled to possession” of the hereditament. The defendants sought to avoid liability for such rates by leasing the hereditaments to special purpose vehicle companies (“SPVs”) without any assets or business, which were then voluntarily wound up, so as to trigger the winding-up exemption to non-domestic rates, or allowed to be struck off the register of companies as dormant companies and thus dissolved, so that the leases and liability for rates passed as bona vacantia to the Crown. The leases were not shams, so that as a matter of real property law they conferred an entitlement to possession upon the SPVs. The claimant local authorities brought claims seeking recovery of non-domestic rates from the defendants, contending that: (i) the 1988 Act should be given a purposive interpretation so that “owner” in section 45(1)(b) meant someone with a “real” entitlement to possession, which in the present cases would be the defendants; and (ii), alternatively, the court could pierce the corporate veil of the SPVs so that the defendants would be treated as the true owners of the hereditaments for the purposes of section 45(1)(b). The defendants applied to strike out the particulars of claim on the basis that they disclosed no reasonable grounds for bringing the claims. The judge allowed the applications in part, striking out those parts of the particulars of claim which related to a purposive interpretation of the Act, but not those parts which related to piercing the corporate veil. The Court of Appeal dismissed the claimants’ appeals, allowed the defendants’ cross-appeals and struck out the claims, holding that the SPVs were the “owners” of the hereditaments for the purposes of section 45(1)(b) and that it was not open to the court to pierce the corporate veil of the SPVs.
On the claimants’ further appeals—
Held, allowing the appeals, (1) that in order to ascertain whether a particular statutory provision imposed a charge, or granted an exemption from a charge, the court should (i) ascertain the class of facts intended to be affected by the charge or exemption, which was a process of interpretation of the statutory provision in the light of its purpose, and (ii) to discover whether the relevant facts, looked at in the round, fell within that class, which was a process of applying the statutory provision to the facts; that, having regard to the historical background and the statutory scheme as a whole, the main purpose of section 45 of the Local Government Act 1988 was to encourage owners to bring unoccupied property back into use for the benefit of the community; that, further, section 65(1) served that purpose by imposing liability for non-domestic rates on the person who had the ability, in the real world, to bring an unoccupied property back into use, namely the person entitled to possession of the property; that although in a normal case “the person entitled to possession” in section 65(1) was to be interpreted as the person who, as a matter of the law of real property, had the immediate legal right to actual possession of the property, Parliament could not have intended that those words should encompass a company which had no real or practical ability to exercise its legal right to possession and on which that legal right had been conferred for no purpose other than the avoidance of liability for rates; that, accordingly, on a purposive interpretation, the words “the person entitled to possession” in section 65(1) connoted a person who had a real and practical entitlement which carried with it in particular the ability either to occupy the property in question, or to confer a right to its occupation on someone else, and thereby to decide whether or not to bring it back into occupation; that, in the present cases, none of the SPVs answered to that description since they had no real or practical control over whether the relevant properties were occupied or not; that, rather, such control had remained at all times with the defendants, who therefore each had been “the person entitled to possession” within the meaning of section 65(1); that it followed that the defendants had been the “owners” of the hereditaments for the purposes of section 45(1)(b) of the 1988 Act and there was a triable issue as to whether they had remained liable for non-domestic rates throughout the duration of the leases; and that, accordingly, the order striking out the claims would be set aside (post, paras 9, 13–17, 25, 27, 30, 46–51, 59–62, 77).
(2) That, even if “piercing the corporate veil” was a coherent principle or rule of law which could be used to hold a company liable for breach of an obligation owed by its controlling shareholder, it could not be applied in the opposite direction so as to hold a person who owned or controlled a company liable for breach of an obligation which had only ever been undertaken by the company itself, since it was not an abuse of the separate legal personality of a company for its owner to cause a legal liability to be incurred by the company; that, if the leases in the present case had been effective to make the SPVs rather than the defendants the “owners” of the properties for the purposes of the 1988 Act, the consequence in each case would have been to make the SPV the only person liable for non-domestic rates incurred from the date of the lease, but the defendant would have remained liable for rates incurred up to that date; that, accordingly, the granting of the leases would not have involved an abuse of the separate legal personality of the SPVs and the principle of piercing the corporate veil could not have been invoked as it would have created a liability to pay rates on the part of the defendant that would not otherwise exist; and that, accordingly, there was no principle which could justify piercing the corporate veil in the present cases (post, paras 73–77).
The following cases are referred to in the judgment of Lord Briggs and Lord Leggatt JJSC:
Barclays Mercantile Business Finance Ltd v Mawson
Bloomsbury International Ltd v Department for Environment, Food and Rural Affairs
Brown v City of London Corpn [
Cardtronics UK Ltd v Sykes (Valuation Officers)
Collector of Stamp Revenue v Arrowtown Assets Ltd
Furniss v Dawson [
Gilbert v Comr of Internal Revenue (
Gilford Motor Co Ltd v Horne [
Hastings Borough Council v Tarmac Properties Ltd (
Ingram v Inland Revenue Comrs [
Inland Revenue Comrs v Burmah Oil Co Ltd [
Inland Revenue Comrs v McGuckian [
Inland Revenue Comrs v Scottish Provident Institution
Jervis v Pillar Denton Ltd
John Laing & Son Ltd v Assessment Committee for Kingswood Assessment Area [
Jones v Lipman [
MacNiven v Westmoreland Investments Ltd
PAG Management Services Ltd, In re
Prest v Petrodel Resources Ltd
R v St Pancras Assessment Committee (
R (Quintavalle) v Secretary of State for Health
Ramsay (WT) Ltd v Inland Revenue Comrs [
Salomon v A Salomon & Co Ltd [
Snook v London and West Riding Investments Ltd [
UBS AG v Revenue and Customs Comrs
VTB Capital plc v Nutritek International Corpn
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