London Borough of Southwark v Ludgate House Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice McCombe,Lord Justice Baker |
| Judgment Date | 04 December 2020 |
| Neutral Citation | [2020] EWCA Civ 1637 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: C3/2019/3084 |
| Date | 04 December 2020 |
[2020] EWCA Civ 1637
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (LANDS CHAMBER)
Martin Rodger QC, Deputy Chamber President & Mr P D McCrea FRICS
RA/56/2018
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice McCombe
and
Lord Justice Baker
Case No: C3/2019/3084
Richard Clayton QC & Faisel Sadiq (instructed by Legal Services LB of Southwark) for the Appellant
David Forsdick QC & Luke Wilcox (instructed by Herbert Smith Freehills LLP) for the 1st Respondent
Mark Westmoreland Smith (instructed by the Legal Department, HMRC) for the 2 nd Respondent
Hearing dates: 24 & 25 November 2020
Approved Judgment
Introduction
The main issue in this appeal is whether on 1 July 2015 (“the material day”) Ludgate House, Southwark, was a single hereditament for rating purposes. The Upper Tribunal (Martin Rodger QC, Deputy President, and Mr PD McCrea FRICS) (“the UT”), on an appeal from the Valuation Tribunal for England (“the VTE”), held that it was not. Their decision is at [2019] UKUT 278 (LC), [2019] RA 423. In consequence of their decision, it is common ground that Ludgate House was required to be removed from the rating list. The billing authority, Southwark LBC, appeals.
The issue turns, in effect, on whether particular rooms in the building were in separate rateable occupation. The UT held that they were.
I can take the facts from the decision of the UT.
Background
Until its demolition in 2018 Ludgate House was an office building of 173,633 sq ft at the southern end of Blackfriars Bridge in the London Borough of Southwark. It stood on the South Bank between Blackfriars Road and Blackfriars Station. It was built in 1988 and was formerly the home of Express Newspapers. It comprised ground and lower ground floors with nine upper storeys. The upper floors were each of about 1765m 2, although the eighth was a little smaller and the ninth smaller still.
The lower ground floor housed plant and machinery rooms and other space ancillary to a large office building. The ground floor included a reception area and a café with kitchen. The first to seventh floors provided open plan office space with only limited partitioning; more cellular offices and less open plan space was provided on the eighth floor, while the smaller ninth floor was almost entirely partitioned into individual offices and board rooms.
Ludgate House Ltd (“LHL”) acquired the freehold in 2010, subject to a lease to commercial tenants. In 2013 planning permission was granted for a comprehensive redevelopment of the building together with the adjoining Sampson House to create a large, mixed use office, residential and retail complex. The lease of Ludgate House expired and the tenants vacated in March 2015. At that point, possession of the building would have reverted to LHL.
On 18 June 2015, before demolition work had begun, a company called VPS (UK) Ltd (“VPS”) contacted LHL with a proposal to secure the building against trespassers by arranging for occupation by property guardians under licences granted by VPS. A property guardian is a private individual who, usually with others, occupies vacant premises under a temporary contractual licence until the building owner requires it for redevelopment. The arrangement provides the guardian with accommodation at a lower cost than in the conventional residential letting market, it provides the supplier with a fee for making the arrangements, and it provides the building owner with some protection against squatters and with the prospect of mitigating liability for non-domestic rates. VPS recommended that 32 guardians be installed to provide “a robust level of protection”. Appendix 1 to the proposal described the “Guardian process”. Among the points that it made were these:
“[VPS] will place Guardians at the Site. These Guardians will occupy the premises as full time residents and their presence will assist with day-to-day management and protection of the buildings.
[VPS] provide … Quality Guardians who are all screened, checked and in employment.”
It went on to stress the quality of the Guardians and the thoroughness of the vetting procedure. It continued:
“[VPS] then performs a thorough induction with the Guardians who pass the vetting procedure. The aim is to ensure that all Guardians are aware of their responsibilities under the terms of their licence.”
Those responsibilities included: ensuring that they do not sleep away from the property for more than 2 nights out of 7; reporting any suspicious activity and not allowing any person who is not an approved Guardian to reside in the property.
LHL accepted the proposal and on 24 July 2015 an agreement was entered into, although by that time the parties had already begun to implement it.
There are two relevant agreements involved: one between LHL and VPS and the other between VPS and the individual guardians. It is not alleged that either was a sham, or did otherwise than accurately reflect the various parties' rights and obligations.
The agreement between LHL and VPS
The agreement between LHL and VPS recited that:
“[VPS] provides property guardian services … in relation to vacant premises … to property owners and their agents. The Services are provided with a view to securing premises against trespassers and protecting them from damage.”
Under the agreement, LHL appointed VPS as “the sole and exclusive provider” of the services (clause 2.1). The services were defined as the property guardian services described in the proposal. They included the provision of services intended to secure the property against trespassers and to protect it from damage, including guarding and caretaking. The agreement provided that VPS would “occupy the Property as a licensee”; that no relationship of landlord and tenant was created between it and LHL; that LHL “retains control, possession and management of the Property”, and that VPS was not entitled to exclude LHL from the building (clauses 2.7.1, 2.7.2). Nor was VPS to be LHL's agent for any purpose (clause 20.1). VPS agreed to use its reasonable endeavours to ensure that the Guardians fulfilled their obligations as contained in the licence (clause 4.1.4) Despite the terms of clause 2.7.2 (that VPS would “occupy the Property as a licensee”), clause 4.2.1 provided that VPS was notentitled to occupy the building itself or by its servants or agents. The rights of occupation to be granted by it were to be in the form of licences rather than tenancies (clause 2.4.2). VPS agreed not to allow any Guardian to “take possession of the Property or any part of it” (clause 4.23.) The agreement was terminable on 30 days' notice, at the end of which the building was to be vacant. LHL was to pay a fee for the services provided by VPS, but this was reduced by £200 per week for each licensee who took up occupation of the building. Finally the agreement provided that the services were “intended to provide a reasonable deterrent to unauthorised access or detect the presence of certain events” (clause 10.1).
The licence to guardians
These were in a standard form. The front sheet consisted of an “Important Note”. That note stated:
“You will not get a right to exclusive occupation of any part of the living space.
The space will be shared with other individuals who [VPS] permits to share the space. You will have to agree with those other individuals how the space is to be used. The size and extent of this space may vary from time to time, as directed by [VPS].”
The note also explicitly referred to the decision of the House of Lords in AG Securities Ltd v Vaughan [1990] 1 AC 417 in which it was held that an arrangement of this kind did not amount to the grant of exclusive possession. It went on to say:
“This agreement contains important rules about how the building is to be occupied and used, and your responsibilities as Guardian.”
The background to the licence was recited in clause 2. Among other things it said that VPS “provides services to property owners to secure premises against trespassers and protect such premises from damage and has agreed to provide those services to the Owner in respect of the Property”. It also said that VPS was not entitled to grant possession or exclusive occupation of “the property or any part of it to any person”.
The area over which the licensee was granted rights was referred to as the “living space”. This was defined as the area designated as available for occupation from time to time, which could be varied by VPS (clauses 1.1.4, 3.4) but in practice the living space extended to the whole of the building excluding the plant rooms.
The licences provided:
i) The guardians had no right to exclusive possession or occupation of any part of the Property (clause 2.2 and clause 4.1))
ii) The guardians had permission to share occupation of the Property with such others as VPS might designate (clause 3.1)
iii) The size and extent of the living space available to the guardians might be varied at any time (clause 3.4)
iv) The guardians had no right to occupy any particular room at the Property. But the guardian was required to inform VPS of which room the guardian was sleeping in “to enable [VPS] to manage the Property in accordance with its obligations to the Owner”. (clause 3.5 and clause 3.6)
v) They had no right of access to the Property other than the living space and/or...
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