R Principled Offsite Logistics Ltd v Trafford Council
| Jurisdiction | England & Wales |
| Judge | Mr Justice Kerr,The Hon |
| Judgment Date | 06 July 2018 |
| Neutral Citation | [2018] EWHC 1687 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/5086/2017 |
| Date | 06 July 2018 |
[2018] EWHC 1687 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Hearing at Manchester Civil Justice Centre
1 Bridge Street West,
Manchester M60 9DJ
Judgment handed down at:
Royal Courts of Justice,
Strand, London WC2A 2LL
THE HON Mr Justice Kerr
Case No: CO/5086/2017
and
Timothy Morshead QC and Luke Wilcox (instructed by Eversheds Sutherland International LLP) for the Claimant
Richard Glover QC and Kelly Pennifer (instructed by Greenhalgh Kerr LLP) for the Defendant
The First and Second Interested Parties did not appear and were not represented
Hearing dates: 1st and 2nd May 2018
Approved Judgment
Introduction
This case is about what constitutes occupation of premises for the purposes of national non-domestic rating law. To the uninitiated, this might seem like a dry enough question but in certain circles it arouses high passions and stimulates serial litigation.
The main business of the claimant (POLL) is occupying premises for reward on behalf of landlord commercial property owners, to the exclusion of the owner landlord and for the avowed purpose of minimising the landlord's liability to pay national non-domestic rates (NNDR). The defendant (Trafford) is the billing authority for rating within its area.
The applicable legislation normally charges NNDR to the person entitled to possession of commercial premises, whether or not that person is in actual occupation. If the person entitled to possession is not the landlord and becomes the occupier of the property, the landlord, neither in occupation nor entitled to possession, is not liable for NNDR, subject to fulfilling certain temporal conditions.
Instead, the liability falls on the tenant occupier, which may charge the owner a fee based on the amount of rates saved, which the owner would otherwise have had to pay. It is therefore important for POLL, Trafford and others to know in what circumstances a person such as POLL will be considered to be in occupation of a commercial property.
POLL says the touchstone of occupation is volition: the exercise of the will to occupy the premises. Trafford submits, on the contrary, that occupation for its own sake, without any separate purpose than to occupy, is not occupation in law and fact. There must be some additional purpose to use the premises for something.
The case arises from the advent of an apparently new growth industry. Businesses that might be called “professional occupiers” agree with landlords to lease premises from landlords but charge what could be called “reverse rent”, so that the tenant is paid to occupy instead of paying to occupy.
This is a rolled up hearing of POLL's application for permission to bring a judicial review challenge to Trafford's decision to issue a particular summons seeking a rates liability order from a magistrates' court, combined with the substantive hearing if permission is granted. POLL also seeks declaratory relief arising from Trafford's “general approach” to its billing functions.
The main point arising is whether the arrangements between POLL and its landlord customers amount to occupation by POLL of the landlord's premises within the applicable legislation. Does there have to be an independent business purpose, such as storage of goods for onward sale, to establish occupation?
That question divides the parties and has spawned the present ongoing dispute which has become untidy and occasionally ill-tempered. Rates liability issues are usually litigated in a magistrates' court and, on appeal, by case stated to this court. A number of such cases in various magistrates' courts are stayed to await the outcome of this case.
The two interested parties (Lancaster and Basildon) are parties in some of those cases. Other billing authorities and businesses at one time wished to be joined. Only Lancaster and Basildon remain in the litigation, but they have not taken any part in the argument before me.
Trafford agreed to stays of certain magistrates' court proceedings against POLL and initially agreed that this court was the appropriate forum to determine the issue of law; but after this claim was brought, changed its mind and now says the matter should be left to the magistrates after all and that this court should only become involved, if at all, on appeal by case stated.
Trafford submits that permission should be refused or alternatively the substantive claim dismissed, on the merits; and, in addition, that permission should be refused because the proceedings are academic; because of delay; because there are disputes of fact which cannot be resolved in this court; and because the broad declaratory relief sought is too general and is unworkable.
Facts
I must stress that the facts are not all agreed. But the following statement from the council, through its officer Ms Janet Whittle, is not in dispute. POLL “markets its services in mitigating business rates by offering property owners to manage their empty space as effectively as possible by using those premises for the purpose of short-term storage”.
Trafford, as guardian of the public purse, “seeks to determine if any rates scheme designed to reduce rates liability does actually involve occupation that is actual, beneficial, exclusive and not too transient”. Ms Whittle commented in her witness statement that written lease agreements produced were “of dubious origin”, with “minimal or no input from the property owner…”.
I was shown an example of a written lease agreement. Mr Richard Glover QC, for Trafford, was also initially disinclined to concede that POLL's leases were genuine. But he accepted that, if there were no leases at all, POLL could not be liable for any non-domestic rates and that, for the purposes of these proceedings only, I should treat the specimen lease as containing the true terms of the bargain between POLL and the relevant property owners.
The terms are these. POLL is the tenant. The rent is a peppercorn. The term is six months. The landlord demises the property to the tenant, POLL. The tenant covenants to pay the rent, if demanded; to pay and indemnify the landlord against “all business rates charged assessed or imposed upon the property from the date of this Lease until the expiration of the Term”.
The landlord remains responsible for paying utility bills. The tenant must keep the property clean and in good repair, fair wear and tear excepted. The landlord is entitled to access on prior written notice. The tenant must not assign or sublet. The landlord must pay to the tenant “all sums due to the Tenant” within 14 days of invoicing. There are various other normal lease terms, which I need not set out.
The financial side of the transaction is said by POLL to be as set out in a single page document setting out “General Terms and Conditions”. Trafford does not accept that these terms are applicable in all cases; its position is that they may be applicable in some cases or not, as the case may be. It is necessary to ascertain the terms of the bargain in each case.
Trafford contended that the purpose of the transactions was the artificial one of “rates mitigation”. However, it disavowed the suggestion that the transactions were a sham. The parties were content with the description of a sham agreement given by HHJ Hodge QC in Rossendale BC v. Hurstwood Properties (A) Ltd [2017] EWHC 3461 (Ch) at [67] as one where:
“the parties to it had the common intention, which necessarily is a dishonest intention, that the transaction should not in fact create the legal rights and obligations which it gives the appearance of creating.”
I therefore accept for the purposes of this hearing that the terms and conditions mean what they say; there is no element of pretence and the parties were not “doing one thing and saying another” (per Sir Thomas Bingham MR in Belvedere Court Management Ltd. v Frogmore Developments Ltd [1997] QB 858, at 876). That does not, of course, prevent Trafford or anyone else contending to the contrary in individual cases, in other proceedings.
The terms and conditions state as follows. POLL undertakes “to provide you with a Lease/Licence for our tenancy of your empty commercial property” (clause 11). The “cost of our service is 20% of the rates saving achieved, a minimum fee may apply”; payable “30 days after exit”; however, the fee is refundable “if a local authority successfully disputes our occupation” (clause 14).
Clause 15, headed Guaranteed Saving, states that fee refunds “will be given to You if You fail to qualify for a rates void period on the property … due to partaking in the service offered by us”. There are also various other terms, which I need not set out. There is no mention of storage of goods or any other activity to be undertaken at the property; indeed, as I have said, the property is described as “empty”.
There is a history of disputes between POLL and Trafford, and between POLL (and other companies) and other local authorities, over whether the company leasing the premises in question was in occupation for rating purposes. The disputes between POLL and Trafford go back to at least 2015. A great deal of correspondence has been generated in the course of Trafford's investigations.
By way of example, Ms Whittle learned from the supermarket chain, Sainsbury's, in March 2015 that it had entered into an agreement with POLL “to store our goods” at various times in 2014 and 2015 at four sets of premises in Stretford Mall. Ms Whittle emailed back asking Sainsbury's for documentary proof and asked why it needed POLL's services as it had its...
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