In a judgment handed down today, 14 May 2021, the Supreme Court has changed an established property law principle in relation to business rates and to mitigation processes.

The combined test cases of Rossendale BC –v- Hurstwood and Wigan Council –v- Property Alliance Group saw a team from Addleshaw Goddard, led by partner Chris Perrin, and including Kevin Prosser QC and Nicholas Trompeter QC seek to strike out claims relating to historic business rates. 

Whilst the claims were joined they related to two different mitigation schemes.

Chris Perrin, partner at Addleshaw Goddard, commenting on the decision said:

"The Court has today changed the well-established principle that a tenant under a valid lease is automatically the person entitled to possession and therefore the rate payer. Instead the Court has said that there is a secondary test in that the Court needs to consider the parties' 'real and practical ability to exercise its entitlement to possession'. The outcome of this decision is that the matters will revert back to the High Court for full trials.

However, it seems to us that this decision potentially means that no one is liable for rates since if, once the facts are determined by the Court, the tenant is not liable neither is the landlord. The reason for this is that where a landlord has granted a valid and subsisting lease (which the Court accepted by striking out the local authorities' arguments of sham) the landlord has no 'real and practical ability' to exercise its entitlement to possession since to do so would be a breach of the lease and open them up to a damages claim from the tenant. Accordingly, this would mean that neither the tenant nor the landlord are liable for rates".  


Following the enactment of the Rating (Empty Properties) Act 2007, since 1 April 2008, owners of empty commercial premises have been liable to pay full business rates following the expiry of the initial 3 months (for offices) or 6 months (for industrial premises) relief. This change in legislation prompted a raft of attempts to mitigate business rates via different methods. 

In 2017 a number of local authorities issued 55 separate claims seeking to recover approximately £10m in alleged arrears of business rates. Whilst the claims were identical they related to three different schemes from different providers.

The defendant property owners sought to strike out the cases without a trial on the basis that they disclosed no reasonable grounds for bringing the claims. 

The local authorities sought to argue that the lease and/or process was (a) a sham (Sham Argument); (b) an abuse of corporate personality allowing the Court to "pierce the corporate veil" following the well-known Supreme Court decision of Prest v Petrodel Resources Ltd [2013] 2 AC 415 (Prest Argument); and/or (c) should be disregarded in accordance with the principle of statutory construction in W.T. Ramsay Ltd v IRC [1982] AC 300 (Ramsay Argument).

The Sham Argument was struck out at first instance and the local authorities were refused permission to appeal. The Prest Argument was struck out at first instance, in the Court of Appeal and Supreme Court. 

In relation to the Ramsay argument this was struck out at first instance and unanimously in the Court of Appeal but the Supreme Court have allowed this argument to proceed to a full trial.

Using a football analogy, it could be said that the decision is 2-v-1 at half time to the property owners and the matters will revert to the High Court for full trials.