Surveyors entitled to payment for reducing shop's business rates

A firm of surveyors who secured a business rate reduction for a shop had provided a ‘claims management service’ and were entitled to payment in full as agreed in the contract.

The issue arose after Bias Harrogate Ltd engaged RVA Surveyors Ltd to secure a reduction in the business rates it paid to the local authority.

A written contract provided that if RVA secured a reduction, the shop was to pay 45% of that reduction plus VAT by way of a fee.

After successfully applying to the local authority for small business rates relief, RVA invoiced the shop for its fee which, including VAT, amounted to 54% of the relief granted.

The shop refused to pay, arguing that its contract with RVA was a "damages-based agreement" (DBA). It argued that the fee exceeded the 50% cap on payments imposed by the DBA regulations and so was unenforceable.

A district judge rejected the shop's argument and gave judgment in favour of RVA.

The Court of Appeal has upheld that decision.

It held that whether the contract was a DBA turned on whether RVA was providing ‘claims management services’.

The legal definition of "claim" was very wide. It was not limited to claims brought in court but encompassed claims made by way of legal proceedings, as in this case.

RVA was providing a service by making a claim on behalf of the shop for a reduction in its business rates liability. It was therefore providing claims management services and the contract was a DBA.

However, the surveyors had agreed to secure a reduction in the business rates payable by the shop, and such reductions would not result in any sum being "recovered" or an award of damages being made.

Thus, there was no "payment" to which the cap applied and there was therefore no obstacle to RVA claiming the contractually agreed fee of 45% of the reduction secured plus VAT.

Please contact us if you would like more information about the issues raised in this article or any aspect of contract law.

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