Hurstwood Properties (A) Ltd and Ors v Rossendale BC and Anor [2021] UKSC 16
- Liquidation
- by Caroline McDonagh
- 24-03-2024
This case has implications in matters where the parties attempt to avoid liability for business rates by using corporate vehicles
The main question posed in this case was whether certain development companies bore any liability to pay non-domestic rates to the council on empty properties that had been leased by those development companies to special purpose vehicle companies (SPV) solely for the purpose of the development companies avoiding the rates liability for which they would otherwise have been liable.
The SPVs argued that there was no such liability, and that they were entitled to the unpaid business rates. They stated that this was because, alternatively:
The lease to an SPV which did not occupy the property did not meet the requirements to make the council the 'owner' of the empty property for rating purposes (the "Statutory Ground"); or
The SPV should be ignored because its purpose was to avoid business rates, which the defendants would otherwise have had to pay. This was claimed to amount to an abuse of the SPVs' separate personality that warranted the piercing of the corporate veil (the "Piercing the Corporate Veil Ground").
In respect of the Piercing the Corporate Veil ground, as is widely understood, to pierce the corporate veil is to disregard the separate legal personality of a company. This means to disregard the doctrine that a company is treated in law as a person in its own right, which is capable of owning property and having its own rights and liabilities distinct from the rights and liabilities of its shareholders. This ground did not find favour with the Supreme Court and was dismissed.
In response to the Statutory Ground, it was important to know who the "owner" of the relevant property was, as only the owner could qualify for rating relief, and only if it could show that it fell within the relevant exemption to liability for the business rates claimed. The relevant exemption was found within some Regulations to the Local Government and Finance Act 1988. These Regulations listed the classes of non-domestic hereditaments (or properties) which, exceptionally, don't give rise to a liability to pay rates when unoccupied. The relevant Regulation stated that these classes include a hereditament "whose owner is a company which is subject to a winding-up order made under the Insolvency Act 1986 or which is being wound up voluntarily under that Act."
In this case, the Supreme Court allowed the appeal by the Local Authorities against the striking-out of their claims to unpaid business rates from the defendant landlords on the basis that the legislation dealing with the payment of business rates for unoccupied properties should be interpreted in the context of the intention behind it, which, it held, was in line with the intention going as far back as the Poor Relief Act 1601, which aimed to deter owners from leaving properties unoccupied for personal financial advantage. It also ultimately held that a court will consider the liability of defendant landlords for business rates at a later stage at trial.