Non-domestic rates success for Cardiff Council
Two recent decisions of the High Court illustrate the benefits of a robust approach to NNDR enforcement by local authorities, and the extent to which the effects of the pandemic can reasonably impact their ability to verify claims to rateable occupation.
In K Pub Trading Ltd & another v Cardiff Council [2021] EWHC 3011 (Admin), two companies alleged that Cardiff Council should have recognized them as ratepayers, and (in consequence) awarded them discretionary pandemic-related grants. They had both purported to notify the Council of their occupancy (and thus liability to rates). Each had produced a licence agreement. The properties in question had been the subject of liability order proceedings in the Magistrates’ Court. HHJ Harman QC, sitting as a Judge of the High Court, held that there were two reasons for the Council not having served a demand on the companies in question. The first was the ongoing litigation, and the second was that the pandemic “which meant that the council could not carry out its usual investigations such as test purchases”.
After considering the Council’s evidence that such investigations were not a priority in 2020 given the rates holiday then in force, he considered that such an approach was a reasonable one. He went on to say “In my judgment, these were not home-grown problems or inefficiencies, but involved known means and resources which rendered it unfeasible in the particular circumstances of each case to investigate the issue of actual occupation or to render a [Non-Domestic Rating Demand]. Moreover, in these circumstances, the council was entitled to take the view that in absence of such investigations the assertion of actual occupation by K & P respectively together with copies of the licences relied upon by them were not sufficient to satisfy the council that such occupation was established.” The related challenge to the refusal to pay discretionary grants accordingly failed.
The case is a classic illustration of the difficulties of challenging the reasonableness of a public body’s decision. Simply because the would-be ratepayer may disagree with the approach the local authority has taken (or a decision it has made) does not mean that it will be amenable to a successful Judicial Review. In turn, this suggests that robust (and reasonable) decisions by local authorities (in the rating context at least) are to be encouraged.
The second case, Queen Street Properties Ltd & another v Cardiff Council [2022] EWHC 39 (Admin) was an appeal by way of case stated from a District Judge’s decision. Two companies presented purported licenses of premises, intended to cause the Council to demand rates from them. The Council declined to accept the licences for a number of reasons, and summonsed the long leaseholders of each hereditament (the purported licensors) on complaints for liability orders in before the District Judge. The licensors and licensees were owned or controlled by identical or related persons. The main arguments before the DJ were that it was for the licensors to show that someone other than them was in rateable occupation, and that in any event if the licences were relevant then they were shams and of no effect.
The DJ held that the licensors had failed to show that the purported licensees were in actual occupation, so that they could not be in rateable occupation by reference to the well known 4-stage test in the Laing case. He held, by reference to In Re Briant, that where premises were occupied (as here – one a bar, another a fish and chip shop) that it was a natural inference – absent other evidence – that it was the owner, or in this case the long leaseholder respondents, who were in occupation. That was in part because of the paucity of documentation (such as utility bills, bank statements and forth) produced by the respondents in circumstances where their officers had partially, but rather selectively, disclosed records from the purported licensee companies.
The DJ then addressed the question of whether the licences were shams. Whilst this was not strictly necessary given the finding on rateable occupation, he was invited to by both parties. He found that the licences in question were indeed shams. That is, by reference to the old authority of Snook v London & West Riding Investments, they were documents which recorded a different agreement to the real agreement (if any) between the parties, done with the intent to deceive the Court and the world. The consequence of that conclusion was that the licence was of no effect at all. Whilst a conclusion of sham carries with it an implication of dishonesty, it is not necessary to prove dishonesty in order to establish a sham, and thereby show that the document or transaction is of no effect. In the rating context, where a respondent to a liability order summons relies on a document to escape liability in circumstances where that document is a sham, such a finding will almost inevitably signal the death knell for their case.
On an appeal by way of case stated before Mr Justice Eyre, the Administrative Court dismissed the purported licensors’ appeals that the DJ had fallen into error both in terms of actual occupation and sham. Eyre J provides a useful summary of the approach to be taken to determining rateable occupation, by reference to Laing, Ratford and In re Briant. The Court went on to dismiss both appeals, holding that there was no error in the DJ’s approach which led to the conclusion that the licensors were in rateable occupation, following which significant liability orders were made against them. In relation to sham, Eyre J analysed the District Judge’s consideration of various aspects of the purported licences which the Council had suggested were indicative of a sham – not least a failure to identify one of the signatories when the companies were clearly associated in some way.
Similarly, he rejected the contention that the DJ had, when reaching a conclusion on sham, wrongly taken account of his finding that the purported licensees were not in actual occupation. That is an illustration of the well-known principles that the Court can look at facts beyond the four corners of the document in question, including how the parties have subsequently behaved, to see whether it meets the test in Snook. In this context, that included having “regard to [the director’s] actions in relation to other companies and to the creation of other documents for the purpose of escaping liability to non-domestic rates”.
These cases illustrate a willingness by both the Magistrates’ Courts and (on appeal to or other challenge in) the Administrative Court to uphold robust, reasonable decisions by local authorities in seeking to recover non-domestic rates, and to identify and expose sham transactions undertaken with the aim of avoiding rating liability.
The Council was represented by Wilkin Chapman LLP solicitors and Chris Royle, Counsel from St. Philips Chambers, a barrister specialising in enforcement and rating law.
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