Isle Investments Ltd v Leeds City Council
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fordham |
| Judgment Date | 19 February 2021 |
| Neutral Citation | [2021] EWHC 345 (Admin) |
| Date | 19 February 2021 |
| Docket Number | Case No: CO/2677/2020 |
| Court | Queen's Bench Division (Administrative Court) |
[2021] EWHC 345 (Admin)
Mr Justice Fordham
Case No: CO/2677/2020
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
SITTING IN LEEDS
Royal Courts of Justice
Strand, London, WC2A 2LL
George Mackenzie (instructed by Town Legal LLP) for the Appellant
William Hanbury (instructed by Leeds Legal Services) for the Respondent
Hearing dates: 1 December 2020, 3 December 2020, 18 January 2021
Approved Judgment
Addendum Footnote (§62) added by the Judge on 2.3.21
Introduction
This is a case about a rates-avoidance arrangement in relation to office premises in Leeds. It features some snails in some crates. In legal terms, the case concerns the approach to identifying ‘sham leases’ in the context of avoiding non-domestic rates (“NDR”) in relation to unoccupied premises. In procedural terms, it is an appeal by way of case stated, arising from a determination of District Judge Holland (“the Judge”) at Leeds Magistrates' Court. By that determination the Judge made a liability order for NDR against the appellant (“Isle”) in the contested sum of £105,728.70 in respect of Units 2, 4 and 7 (“the Units”) within Airedale House in Beeston, Leeds for relevant periods between 24 May 2018 and 31 March 2020. The Judge gave a judgment dated 3 April 2020 (“the Judgment”). Wishing to pursue an appeal to this Court, Isle asked the Judge to state a case, which she did by issuing a case stated document dated 30 June 2020 (“the Case Stated”) which said it contained “an expanded version of the less detailed summary of the conclusions and findings provided in the judgment”. The Case Stated identified the following question for this Court:
On the facts as I found them to be, was I right to conclude that the sole purpose of these leases was for [Isle] to seek to avoid the liability to pay business rates in circumstances where the tenant had no intention of paying the business rates, as opposed to a lease intended to provide exclusive possession to the tenants for the conduct of the tenants' businesses. In short, was I right to conclude that the leases were shams?
In order to help with clarity, consistency and flow I will use shorthand terms (as follows) for: the apparent nature of the relationship (“ANR”); actual occupation (“AO”); an exclusive entitlement to occupation (“EEO”); newly created shelf companies (“NCSCs”); and the true nature of the relationship (“TNR”). I will use also a shorthand phrase ( “Effective-Avoidance Intent”) to mean this: the position where an arrangement is intended to be effective in producing an outcome of effectively avoiding a person's statutory obligations (in this case, NDR liability).
This is my encapsulation of the background to this case. Isle had acquired the Units. Its objective was to avoid its liability to pay NDR in respect of them. It made contact with a company called Crusader. They entered an arrangement whereby Isle agreed to pay Crusader 20% of the NDRs applicable to the Units, in return for Crusader implementing a scheme designed to achieve Isle's NDR-avoidance objective. The upshot was a series of short (21-week) leases with Isle as stated ‘landlord’ and a series of NCSCs as the stated ‘tenant’ (or lessee). The Judge described eight leases as follows (giving date, unit and tenant): (1) 24.5.18 Unit 2 Property Alliance (9) Ltd; (2) 24.5.18 Unit 4 Property Alliance (9) Ltd; (3) 24.5.18 Unit 7 Property Alliance (9) Ltd; (4) 19.10.18 Unit 2 Property Alliance (10) Ltd; (5) 19.10.18 Unit 4 Property Alliance (10) Ltd; (6) 16.3.19 Unit 2 Property Alliance (12) Ltd; (7) 16.3.19 Unit 7 Property Alliance (12) Ltd; (8) 11.8.19 Unit 7 Property Alliance (14) Ltd. To these can be added two more – (9) 6.1.20 Unit 4 Property Alliance (18) Ltd; and (10) 6.1.20 Unit 7 Property Alliance (18) Ltd – on which no point of substance turns, so that references below to the eight leases, the later leases and the NCSCs apply equally to these leases and ‘tenants’. The Judge also described three visits by the Council's Ms Linsell, on: (i) 17.7.18; (ii) 15.1.19; (iii) 20.6.19. The issue for the Judge was whether the leases were genuine in which case Isle would have no NDR liability, or whether they were a sham in which case Isle would be liable for NDR.
The hearing of this appeal took place by a remote video hearing. Both Counsel were satisfied, as was I, that the mode of hearing involved no prejudice to the interests of their clients. The open justice principle was secured: the hearing and its start-time were published in the cause list, together with my clerk's email address, usable by any person – whether associated with the parties, a member of the press, or a member of the public – wanting to observe the hearing. A remote hearing eliminated any risk to any person from having to travel to or be present in a court room during the pandemic. I am satisfied that the mode of hearing was appropriate, necessary and proportionate.
The law in relation to sham
Authorities relating to sham
The parties drew to my attention a long line of authority relating to the concept of sham. In this judgment I will refer to cases by short-form names, accompanied by a full citation the first time they are mentioned. But first I will introduce the most noteworthy cases in date order, giving an indication of the subject-matter of each case. First, these cases in the period 1966 to 2011. (1) Snook was a decision of the Court of Appeal on 17.1.66 which decided that a refinancing arrangement relating to an MG car was not a sham: Snook v London and West Riding Investments Ltd [1967] 2 QB 786. (2) Miles v Bull was a decision of Megarry J on 30.8.68 which refused summary judgment against a wife, sought by a third party who had entered an arrangement to buy the matrimonial home from the husband: Miles v Bull [1969] 1 QB 258. (3) Aldrington was a decision of the Court of Appeal on 7.7.78 which decided that a ‘licence’ arrangement in relation to a flat in Highgate was what it purported to be and not a tenancy: Aldrington Garages Ltd v Fielder (1983) 37 P & CR 461. (4) Ramsay was a decision of the House of Lords on 12.3.81 which decided that two schemes had failed to achieve their tax-avoidance purpose. (5) Street v Mountford was a decision of the House of Lords on 2.5.85 which decided that a ‘licence’ arrangement in respect of rooms in Bournemouth had the effect of creating a tenancy: Street v Mountford [1985] 1 AC 809. (6) Antoniades was a decision of the House of Lords on 10.11.88 which decided that separate agreements in respect of the two occupiers of a top floor flat in Upper Norwood disguised the arrangement's true character as a tenancy: Antoniades v Villiers (AG Securities v Vaughan) [1990] 1 AC 417. (7) Belvedere was a decision of the Court of Appeal on 24.10.95 which decided that the grant to an associated company of 56 leases in respect of a block of flats in Barnet were not a sham: Belvedere Court Ltd v Frogmore Developments Ltd [1997] QB 858. (8) Jones was a decision of Neuberger J on 22.6.00 that a tenancy and asset-sale to an off the shelf company, to protect a Welsh farming family's home and assets from action by a mortgagee bank, were not a sham: National Westminster Bank Plc v Jones [2001] 1 BCLC 98 (a conclusion untouched by the judgment of the Court of Appeal on other issues [2001] EWCA Civ 1541 at §39); (9) Hitch was a decision of the Court of Appeal on 26.1.01 which decided that the Special Commissioners had reasonably concluded that an agreement for disposal of Wiltshire farmland, designed to avoid development land tax, was a sham (from which it followed that a related Deed was also a sham): Hitch v Stone [2001] EWCA Civ 63 [2001] STC 214. (10) A v A was a decision of Munby J on 29.1.07 which decided that a husband's family trusts holding shares in a chicken processing company were not shams: A v A [2007] EWHC 99 (Fam). (11) Autoclenz was a decision of the Supreme Court on 27.7.11 which decided that Derbyshire car valeters were workers entitled to minimum wage protection notwithstanding the ‘contractor's services’ agreements they had signed: Autoclenz Ltd v Belcher [2011] UKSC 41 [2011] ICR 1157.
Then, these cases in the period 2012 to 2016. (12) Makro was a decision of HHJ Jarman QC on 28.6.12 which decided that the storage of pallets of documents in a Coventry warehouse for short periods ought to have been found to be rateable occupation, meaning the NDR-avoidance purpose of the overall arrangement had been achieved: R (Makro Properties Ltd) v Nuneaton & Bedworth Borough Council [2012] EWHC 2250 (Admin). (13) Kenya Aid was a decision of the Divisional Court on 22.1.13 which decided that the rateable occupation by a charity of premises in Sheffield was ‘wholly or mainly for charitable for purposes’ to trigger a statutory 80% NDR reduction: Sheffield City Council v Kenya Aid Programme [2013] EWHC 54 (Admin) [2014] QB 62. (14) PAG (2015) was a decision of Norris J on 9.8.15 which decided that an NDR-avoidance arrangement in relation to unoccupied premises, involving ‘leases’ to special purpose vehicle companies (SPVs) immediately placed into voluntary liquidation, to trigger statutory NDR-exemption (a) were not shams (b) but made it appropriate to make winding-up orders against the corporate scheme operator (i) not as contrary to the public interest but (ii) for abuse of the insolvency legislation: Secretary of State for Business, Innovation and Skills v PAG Management Services Ltd [2015] EWHC 2404 (Ch) [2015] BCC 720. (15) South Kesteven was a decision of the Divisional Court on 27.1.16 which decided (applying Kenya Aid) that the rateable occupation by a charity of premises in Grantham was ‘wholly or mainly for charitable for purposes’ to trigger the statutory 80% NDR reduction: South Kesteven...
To continue reading
Request your trial
-
Anjna Khurana v North Central London Clinical Commissioning Group
...R (Dewson) v United Lincolnshire Hospitals [2021] PTSR 1474 at [112]–[113] and R (Good Law Project) v Secretary of State for Health [2021] EWHC 345 (Admin) at [140]. He also cited NCL's Patient and Public Engagement Strategy 2020–22 at [1] and the NHS Constitution, principles 4 and 7, bot......
-
Haskell Elias v David Mamistvalov
...create the legal rights and obligations that they appear to do. As Fordham J explained in Isle Investments Ltd v Leeds City Council [2021] EWHC 345 (Admin), after reviewing the authorities, although the Court is astute to detect shams it starts with the presumption that parties to a writte......
-
Reducing business rates liability by…snail farming?
...to unravel thinly-veiled mitigation schemes. To that end, the High Court decision of Isle Investments Limited v. Leeds City Council [2021] EWHC 345 (Admin) may provide some comfort. Who pays business rates? The person in rateable occupation of commercial premises will be the party liable to......