The Court of Appeal in R (on the application of Emeraldshaw Limited) v Sheffield Magistrates’ Court (Respondent) & Sheffield City Council (Interested Party) [2025] EWCA Civ 1601 (“Emeraldshaw”) has considered and provided important guidance on the scope of the principles to be derived from the Supreme Court’s decision in Rossendale Borough Council v Hurstwood Properties (A) Limited [2021 UKSC 16, [2022] AC 690 (“Rossendale”).
Both Rossendale and Emeraldshaw concerned liability for non-domestic rates (“NDR”), also known as business rates, in respect of unoccupied commercial property, liability for which is imposed by section 45 of the Local Government Finance Act 1988 (“the LGFA”) upon the “owner” of the relevant hereditament. The “owner” is defined by section 65(1) of the LGFA as the person entitled to possession of it. In Rossendale, the Supreme Court observed that the “owner” “is to be interpreted as denoting in a normal case the person who, as a matter of the law of real property, has the immediate legal right to actual physical possession of the relevant property”, ¶[47].
However, in Rossendale the Supreme Court concluded that the “tenants” in that case (the special purpose vehicles (“SPVs”) to which leases had been granted in pursuance of a rates mitigation scheme) “had no real or practical control over whether the property was occupied or not and that such control remained at all times with the landlord”, ¶[48]. Construing the legislation that imposes liability for NDR in a purposive manner, consistent with the approach in WT Ramsay Limited v Inland Revenue Commissioners [1982] AC 300 (“Ramsay”), gave effect to Parliament’s purpose which was to encourage owners of unoccupied commercial property to bring it back into use by imposing liability on the person who has the ability, in the real world, to achieve that objective, ¶[30].
Rossendale in practice
In Emeraldshaw, the Appellant, freehold owner of the relevant hereditaments, against whom the District Judge in the Magistrates’ Court had made liability orders based on the principles laid down in Rossendale, sought to argue that those principles were limited to circumstances which mirrored those in Rossendale, namely the creation of SPVs which would either go into liquidation or be dissolved. Holgate LJ, giving the judgment of the Court of Appeal in Emeraldshaw, identified the ratio in Rossendale as “… the “owner” of a hereditament for the purposes of s.65(1) of the LGFA 1988 is the person who has the immediate legal right to actual physical possession of that property, unless, in the circumstances of the case, he or she has no real or practical ability to exercise that right, so as to bring the property back into use, and has only been granted that right for the purpose of avoiding liability for NDR …”, ¶43].
Accordingly, there is no set of narrowly defined and limited circumstances in which the Rossendale principle will be applied. The question at the heart of who is the “owner” of unoccupied commercial premises will be answered by reference to the real and practical ability of a party to bring those premises back into use. That will invariably involve a rates mitigation scheme and may or may not share some of the characteristics of the schemes that operated in the Rossendale case but a slavish search for direct parallels between the facts of Rossendale and any subsequent scheme is neither appropriate nor necessary.
Of particular interest is the fact that the mechanism for transferring the right to possession in Emeraldshaw was a tenancy at will agreement (“TAW”), such agreements being commonly used in the context of rates mitigation schemes. As Holgate LJ noted at ¶[77], the terms of the TAW enabled the Appellant to terminate the tenant’s rights at will, a tenant at will can only sublet (a means of bringing the property back into use) while its own interest subsists and there is no security of tenure under such an instrument. Whilst there were other factual matters that provided further support for the District Judge’s conclusion that the tenant under the TAWs had no real or practical ability to bring the relevant hereditaments back into use, it is arguable that the use of a TAW agreement to facilitate a rates mitigation scheme will, by itself, be adequate to justify the application of the Rossendale principles to the “ownership” question.
Given the widespread use of TAWs in NDR avoidance schemes, often as part of a scheme ‘supplied’ or ‘arranged’ by a third party ‘rates mitigation company’ for a commercial fee, the decision in Emeraldshaw might well cause alarm throughout the ‘rates mitigation industry’. Its implications are widespread and will no doubt be the subject of intense scrutiny and argument in Magistrates’ Courts up and down the country.
Rowena Meager represented the successful rating authority, Sheffield City Council, at trial, before the High Court and in the Court of Appeal.
