Councils hit by High Court ruling on business rates and ‘occupation’
A company can occupy business premises to enable a building’s owner to escape liability for business rates since the law does not say ‘occupation’ must be for any additional business purpose beyond that of the occupation itself, the High Court had ruled.
Mr Justice Kerr said in Principled Offsite Logistics Ltd, R (On the Application Of) v Trafford Council [2018] EWHC 1687 that the case had been long and “occasionally ill-tempered” and that in addition to Lancaster City Council and Basildon Borough Council as interested parties a number of other cases at magistrates courts were waiting on its outcome.
He said the main business of Principled Offsite Logistics (POLL) was occupying premises for reward for landlords “for the avowed purpose of minimising the landlord's liability to pay national non-domestic rates” as a landlord not in occupation or entitled to possession because of the presence of a tenant was not liable for business rates.
The liability would instead fall on the tenant occupier, which could charge the landlord a fee based on the amount of rates saved.
Mr Justice Kerr said: “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 judge said the main point was whether there must be an independent business purpose, such as storage of goods, to establish occupation.
A lengthy dispute had arisen between Trafford and POLL and numerous inspection visits by council officers had “generated some friction”.
Mr Justice Kerr said: “In the present case, the business of the putative occupier is the business of occupation. The purpose of the occupation is not to store goods; it is, so to speak, to plant the occupier's flag; to populate the premises to whatever extent is required to occupy it in law and fact.
“The reason why that is done – the motive, if you prefer – is rates avoidance for the landlord, but the morality of that is neither here nor there.”
This left to be decided whether possession “is of some value or benefit to the possessor – present where the value or benefit is the occupancy itself”, the judge said: “Having reflected on this, I cannot see any good reason why, if ethics and morality are excluded from the discussion, the thing of value to the possessor should not be the occupancy itself.
“The verb ‘occupy’ and the nouns ‘occupation’, ‘occupancy’ and ‘occupier’ are, in the end, ordinary English words. Their meaning has developed in case law to give them a sensible construction, but they have not been given technical statutory definitions.
“I prefer the submissions of POLL to those of Trafford because they better fit the ordinary meaning of occupation. I find no concept within the meaning of the word requiring a purpose or motive beyond that of the occupation itself.”
The judge said the question in each case was whether the four elements in the JS Laing case were present. The third – "the possession must be of some value or benefit to the possessor" – was sufficiently present where the intention was to occupy for reward, without any further commercial or other purpose.
“It follows that the decision to lay the informations in early September 2017 including the challenged decision were, as it turns out, founded on what I have decided to be a wrong view of the law. The decision was to lay informations based on POLL being liable for unoccupied rates, not occupied rates. Trafford believed when it decided to lay the informations that POLL could not be in occupation if it had no purpose for occupying beyond that of rates mitigation,” the judge said.
But he added: “Does that mean the decision challenged, to lay the information relating to 124-125 Stretford Mall, must be quashed? In my judgment, it does not. The decision to lay the informations was taken in good faith based on the view of the law set out in Trafford's response to the pre-action protocol letter. That view of the law was not perverse, irrational or obviously ill-founded. As this judgment shows, the law was not clear from the authorities."
Mr Justice Kerr said that if the argument before him had gone the other way, Trafford's decision to lay informations would on any view be good in law. “It is not retroactively rendered bad in law merely because I have now decided the issue in the way I have. The lawfulness of the decision is to be judged as at the time when it was taken.
“POLL has succeeded in its primary contention of law, but has not succeeded in securing an order to quash the specific decision it has challenged.”
Mark Smulian
