R Makro Properties Ltd v Nuneaton & Bedworth Borough Council
| Jurisdiction | England & Wales |
| Judge | JUDGE JARMAN |
| Judgment Date | 28 June 2012 |
| Neutral Citation | [2012] EWHC 2250 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | CO/8845/2011 |
| Date | 28 June 2012 |
[2012] EWHC 2250 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Strand
London WC2A 2LL
His Honour Judge Jarman, QC
CO/8845/2011
MR GLOVER (instructed by BWS LLP) appeared on behalf of the Claimant
MS WIGLEY (instructed by Nuneaton & Bedworth Borough Council) appeared on behalf of the Defendant
This is an appeal by way of case stated from the decision dated 14 April 2011 of District Judge Friel sitting at Rugby and Leamington Magistrates' Court when he issued liability orders against Makro Properties Limited in respect of unoccupied property rates for the rating years 2009 to 2011 upon a retail warehouse at Silverstone Drive Rowley's Green in Coventry together with costs, and a liability order for costs against Makro Self Service Wholesalers Ltd. I shall refer to the companies individually by their initials and together as the companies, and the warehouse in question as such, although the district judge referred to it as the hereditament in keeping with the language used in the statutory provisions.
By the case stated, dated 2 August 2011, the district judge set out two questions for the opinion of this court as follows:
i. "(1) Whether on the facts found by the court about the level, purpose and benefit to the ratepayer of the storage occurring on the hereditament the court was correct to decide that the hereditament was not in rateable occupation between 25 November 2009 and 12 January 2010 and after 23 July 2010.
ii. (2) In the event that the court was not correct so to decide, whether the court was correct to consider (a) that rateable occupation would continue throughout the period 12 January 2010 to 23 July 2010 and (b) that the occupier would be Makro Properties Limited."
The companies argue that for the periods identified in the first of those questions, the warehouse was occupied by MSSWL and so liable to rates. However, Nuneaton and Bedworth Borough Council as rating authority ("the Council") argue that the warehouse was not so occupied.
That reversal of usual roles comes about as a result of a change in liability for unoccupied property rates on warehouse hereditaments which came into force on 1 April 2008. Before then, unoccupied property rates were not payable upon such hereditaments. By 2007 there was concern that there was consequently a disincentive to let empty business properties, and in the budget report in that year it was announced that the Government intended to modernise the rates payable in respect of such properties.
The reforms were implemented by the Rating (Empty Property) Act 2007 and the Non-Domestic Rating (Unoccupied Property)(England) Regulations 2008. In an explanatory memorandum to the Regulations put before Parliament by the Department for Communities and Local Government, it was stated that the purpose of such reforms was to "enhance the supply of commercial property available to new and existing businesses and thereby to help reduce rent levels, which currently place a burden on the competitiveness of the UK".
In an impact assessment annexed to the memorandum, it was stated that the Government considered that as in the previous form of empty property relief, all property should receive an initial period of relief from business rates when it first became empty. The reasoning set out was that the process of turning over tenants or vacating and selling property is an important part of an efficient property market. Accordingly the initial three month period of 100 per cent relief from business rates for empty property was retained. It was further stated that the Government had considered the case for an extended period of rates relief for industrial and warehouse property and reference was made to evidence that there was an apparent "equivalence of risk" in owning these properties. The decision was made therefore to provide a further three month exemption from rates for such premises, bringing the total period to six months.
It is common ground before me that the six month period applies to the warehouse and that the effect of section 45 of the Local Government Finance Act 1998 and the 2008 Regulations is that the six month rate free period can be triggered subsequently when the property becomes empty again, so long as there has been an intervening period of six weeks or more. I will set out in greater detail these provisions when I consider the statutory framework.
Hence the companies argue that MSSWL occupied the warehouse for more than six weeks up to 12 January 2010 and so occupied it again from 23 July 2010 in order to take advantage of the six month free period.
The district judge did not accept that occupation had been shown. In the case stated he succinctly set out the facts which he found as follows:
i. "(A) Both MPL and MSSWL were part of the Makro group of companies. MPL was the freeholder of the hereditament subject to the rating demand.
ii. (B) MSSWL had the benefit of a lease for the premises, which they occupied for the purpose of a cash and carry business until 1 June 2009, when the premises were cleared and vacated. The company surrendered the lease on 31 December 2009.
iii. (C) Between 25 November 2009 and 12 January 2010 some 16 pallets of MSSWL paperwork (which it was bound by law to retain) was stored there. The pallets of paperwork occupied something like 0.2% of the floor space which exceeded 13,000 2m. So far as the period after the surrender of the lease was concerned there was an informal intra-group permission, though no written agreement, for MSSWL's storage of its property there.
iv. (D) Between 12 January 2010 and 23 July 2010 the premises were empty, save for the property which had been abandoned there when it had been vacated. There was an intention to sell the Coventry premises but there was a reserve plan in the event of failure to sell within the 6 months of the vacating of the premises and that was to seek to reoccupy to a minor degree for a short period exceeding 6 weeks.
v. (E) On 23 July 2010 some further 40 pallets of MSSWL paperwork were delivered and stored there. Between 17 August 2010 and 29 November 2010, 25 of those pallets were removed from the premises. The overall floor space occupied remained roughly the same as in the earlier storage.
vi. (F) On 21 September 2010, some further pallets of store wrapping and till units were transferred to the premises from premises in Swansea—certainly fewer than 60 pallets.
vii. (G) The rates for the period of storage 25 November 2009 to 12 January 2010 and 23 July 2010, to date have been paid."
The parties referred to many decided cases on rateable occupation before the district judge as they have done before this court. The district judge accepted that rateable occupation occurred if only part of the hereditament was used and that the determining factor in many of the cases concerning storage was whether the goods stored were of value or of no value. He accepted that the goods stored in the present case were of value but went on to say this at paragraph 34 of his judgment:
i. "But I do not think that a fair reading of the cases leads to the conclusion that it would be wrong to consider the 'de minimis' principle in determining if there were actual occupation; nor to the conclusion that the storage of any goods of value must necessarily mean that the storage and consequently the occupation were beneficial. If the 'de minimis' principle could not apply, it would not matter if only one pallet of paperwork or merely one file of paperwork were stored because it would still be occupation of part of the hereditament. I accept that many of the cases show that slight usage can be sufficient to attract rating liability. It was tentatively suggested on behalf of the Council that a different approach to 'occupation' within the provisions in question might be adopted but I do not agree with that suggestion. Yet there must come a point at which the billing authority and the court can reasonably say that the usage is so minuscule as not to amount to rateable occupation, as the Council did in this case. The question is which side of the line between occupation and non-occupation did the storage lie. We are looking at 0.2% of floor space, maybe a little more after the delivery from Swansea. In my judgement the Council was entirely justified in saying that the storage did not amount to actual occupation".
At paragraph 35 he dealt with the issue of whether the occupation was beneficial as follows:
i. "As to whether the occupation was beneficial, I cannot accept that the notion that storage there was necessarily beneficial because it was mandatory and had to be done somewhere. It would be disingenuous to accept on the costings that the storage at Coventry was worth the removal of the paperwork from Oldham or other items from Swansea. The reality is that the chattels were placed in the Coventry store by MSSWL with a view to incurring rateable liability for a short period (certainly not beneficial) so that it or MPL could avoid liability for a longer period. The potential avoidance of liability is the only 'benefit'."
In paragraph 6(B) and (G) of the case stated he set out inferences as to the intention of the companies which he had drawn from the primary facts. After summarising his findings in paragraph 35 of the judgment he continued as follows:
i. "I could discern no benefit to MSSWL; and the avoidance of rating liability was the only benefit to MPL....
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