High Court: liability for business rates not passed to sham company

The controversy in the case of Broxfield Ltd v Sheffield City Council revolved around demands for business rates sent by the local authority to the appellant on 25 January 2016 in respect of a property known as Courtwood House in Sheffield.

There were three separate demands, reflecting three separate hereditaments, for the period 18 December 2015 to 31 March 2016, totalling £62,514.01.

Those demands were not paid and, on 21 April 2016, the local authority had summonses issued seeking liability orders. The appellant contested the liability orders, arguing that from 18 December 2015, and throughout the liability period in question, rateable occupation, and therefore liability to rates, had passed to a company called Busy Bodies Business Services Ltd.

At trial before the District Judge, the local authority’s case was that no valid lease or other valid contractual arrangement had been entered into between the appellant and Busy Bodies which passed rateable occupation to the latter company; and that, in any event, the whole arrangement was an obvious sham. The District Judge found the first limb of the local authority's case proved. Having made that finding, she determined that it was unnecessary for her to go on to consider the question of sham. The High Court considered that that was a mistake, and the District Judge acknowledged that it would have been helpful for her to have addressed the second limb. In her re-amended case, she stated that she was satisfied, having reviewed the evidence and her previous findings, that the whole arrangement was a sham.

The High Court dealt first with this second limb because, if the arrangement was a sham, it could deal simply with the legal argument about the validity of the supposed contractual arrangement between the appellant and Busy Bodies.

The Hight Court said that no reasonable judge could have reached a decision other than this one. It was an overwhelming case of sham. There was never any bona fide intention to pass rateable occupation to the man of straw that was Busy Bodies. Busy Bodies never had the means to pay the rates nor was it ever intended that it should do so. The arrangements that were set up were not bona fide and untrue evidence was given to the court.

The High Court also agreed with the District Judge that what happened here did not create either a contractual tenancy or licence. The decisions of the District Judge were affirmed, and the appeal was dismissed.