- Court of Appeal (Civil Division)
- 4 December 2020
- Lewison, McCombe and Baker LJJ
- [2020] EWCA Civ 1637
- [2020] PLSCS 221
Rating – Non-domestic rates – Hereditament – Office building occupied by “property guardians” under licence while awaiting redevelopment – Each having own allocated room – Valuation Tribunal for England dismissing appeal by first respondent building owner against second respondent valuation officer’s refusal to alter 2010 non-domestic rating list in light of guardianship arrangements – Upper Tribunal allowing first respondent’s appeal – Appellant billing authority appealing – Whether rooms in separate rateable occupation – Appeal allowed
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. Between 1 July 2015 and May 2017, it was occupied by a number of licensees under arrangements made between the respondent owner of the building and a property services company (VPS) which specialised in the supply of “property guardians”.
Property guardians were private individuals occupying vacant premises as their residence under a temporary contractual licence until the building owner required it for redevelopment. The guardian was provided with accommodation at a lower cost than a conventional residential letting, the supplier received a fee for making the arrangements and the building owner had some protection against squatters and the prospect of mitigating liability for non-domestic rates.
The second respondent valuation officer refused the first respondent’s request to alter the 2010 non-domestic rating list in light of the guardianship arrangements on the basis that the whole building was now in domestic use. The Valuation Tribunal for England (VTE) upheld that decision on the ground that the first respondent was in rateable occupation of the whole building as a single hereditament.
The Upper Tribunal allowed the first respondent’s appeal on the basis that the guardians’ individual rooms were separate hereditaments; and that the rateable occupier of each of those hereditaments was the individual licensee. As the rooms were used wholly for the purpose of living accommodation, the guardians were liable for council tax and not non-domestic rates: [2019] UKUT 278 (LC); [2019] PLSCS 188.
In consequence of that decision, the building was required to be removed from the non-domestic rating list. The appellant billing authority appealed.
Held: The appeal was allowed.
(1) The first respondent had engaged VPS for the specific purpose of providing property guardian services; and the guardians were the means by which those services were provided. They could not have performed those services without living in the building. The presence of the guardians on site was an essential component of that which the first respondent had bargained for. That was why the licence provided that it was a serious breach if a guardian did not make the property their abode.
In a case such as the present, the purpose of the guardian on the one hand and VPS/ the first respondent on the other were complementary and mutually reinforcing. The purpose of the guardians living in the building was to facilitate VPS’s operation of providing property guardianship services to the first respondent. VPS needed the guardians to fulfil its obligation to provide the property guardianship services; and the guardians knew that was so because the licence agreement told them. They had also gone through an induction programme to ensure that they understood their responsibilities. Both the recitals, and the terms on which they were permitted to live in the building, were consistent with and supportive of that mutual purpose.
(2) The tribunal said that each guardian had exclusive occupation of their particular room, clearly demonstrated by the provision of a key. However, that was not of legal significance. The sense in which an individual guardian had exclusive use of their room was no different from the exclusive use by a lodger. They were not in rateable occupation even if they had a key to the individual room which they occupied: Allan v Liverpool Overseers (1873-74) LR 9 QB considered.
The tribunal had asked the wrong question when it stated that the terms of the licence were not inconsistent with residential use. The question was whether the terms of the licence were inconsistent with exclusive occupation by the guardians. Sole use was not necessarily the same as exclusive use. The terms of the licence proclaimed that a guardian was not being granted exclusive occupation of any part of the building but the tribunal had not addressed that point.
(3) The first respondent’s agreement with VPS made clear that it was not giving up possession of any part of the building. The agreement asserted that the first respondent retained both possession and control; and forbade VPS from occupying the property. No one had suggested that that agreement was a sham or pretence. The purpose for which the building was occupied by the guardians was a common purpose which was of direct benefit to the first respondent and/or VPS. The first respondent and/or VPS retained at least contractual control over the building to realise that benefit, precisely because neither had parted with possession (or indeed occupation). The question was not, therefore, one of “paramount occupation”, which the tribunal had considered, but of “general control”, which was the decisive factor in establishing who was in rateable occupation of the building.
(4) An essential fact of occupation was the relative position of the parties and the rights under which each party occupied. The tribunal was wrong to confine itself to the actual exercise of rights, rather than assessing what effect the exercise would have had, if exercised. Absence of evidence was not evidence of absence. A lack of constant interference in the day to day running of the business did not equate to lack of control. The best and most effective control might be where the person in control hardly needed to intervene at all, having established a stable and compliant system: Esso Petroleum Co Ltd v Walker [2013] UKUT 52 (LC); [2013] PLSCS 225 followed.
The effect of the contract between VPS and the guardians was a question of law. The tribunal had misappreciated the effect of the contract and the appeal court was entitled to intervene. Based on its view of the effect of the contractual arrangements, the tribunal reached the wrong conclusion in holding that the guardians were in rateable occupation of their individual rooms: Solihull Corporation v Gas Council [1962] RA 113 followed.
Richard Clayton QC and Faisel Sadiq (instructed by Southwark London Borough Council) appeared for the appellant; David Forsdick QC and Luke Wilcox (instructed by Herbert Smith Freehills) appeared for the first respondent; Mark Westmoreland Smith (instructed by HMRC Legal Department) appeared for the second respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Southwark London Borough Council v Ludgate House Ltd and another
