City council defeats appeal by landlord over refusal of permission to apply for judicial review in business rates case

Landlord Emeraldshaw brought the action against Sheffield Magistrates' Court.

Introducing the case, Lord Justice Holgate said: “The central issue in this appeal is the legal basis and scope of the decision in Rossendale Borough Council v Hurstwood Properties (A) Limited [2021] UKSC 16; [2022] AC 690.

“There the Supreme Court applied the ‘Ramsay principle’ (WT Ramsay Limited v Inland Revenue Commissioners [1982] AC 300) to certain rate mitigation schemes for avoiding liability to non-domestic rates in respect of unoccupied hereditaments."

He said the court had to decide whether it was arguable that the magistrates' erred in law in deciding Emeraldshaw had the real and practical entitlement to possession of its commercial property rather than its tenant, Space to Help (Yorkshire).

This would have treated Emeraldshw as ‘the owner; of that property and therefore liable for business rates for the property as an ‘unoccupied hereditament’ under s.45 of the Local Government Finance Act 1988.

Emeraldshaw bought the property in June 2021 and granted two tenancies at will to STHY with a nominal rent payable.

It told Sheffield City Council that STHY was “the person entitled to possession" of each of the two hereditaments and not Emeraldshaw itself.

Sheffield rejected this, sent rates bills to Emeraldshaw and summonsed it before the magistrates when it failed to pay.

After the council won before a deputy district judge, Emeraldshaw appealed to the High Court. However, HHJ Klein refused its application for permission to apply for judicial review despite finding two grounds arguable.

Emeraldshaw’s first ground of appeal was that HHJ Klein was wrong to hold that it was not arguable that the district judge had misapplied Rossendale in finding that STHY was not entitled to possession within the meaning of section 65(1) of the Local Government Finance Act 1988.

It further contended he was wrong to hold that it was not arguable that the district judge had erred in concluding that the tenancy agreements were shams, and was wrong to hold that section 31(3D) of the Senior Courts Act 1981 was engaged.

Holgate LJ said: “I have analysed the Rossendale decision…a major part of the appellant's case is based on a misreading of that authority.

“There is no requirement for the court to be satisfied that the circumstances of a case are unusual before it is permissible to apply the Rossendale test.”

He added: “Given the district judge's unimpeachable reasoning, it is untenable for the appellant to complain that the judge erred by placing significant weight on his conclusion that the sole purpose of the tenancy agreements was to avoid liability for [business rates].

“Such a finding forms a significant and integral part of the test laid down in Rossendale (see [43] above). The judge applied both parts of that test. He did not simply decide that the agreements served no purpose other than to avoid liability for NDR. He also decided that STHY had no real and practical ability to exercise the right to actual physical possession of the two hereditaments let to it or to bring them back into use.”

Holgate LJ concluded the first ground was “wholly unarguable” and so neither of the other grounds arose.

He dismissed the appeal and Lady Justice Falk and the President of the Family Division Sir Andrew McFarlane both agreed.

Mark Smulian