North Somerset District Council v Honda Motor Europe Ltd & Ors

Late service of a business-rates demand notice under regulation 5 of the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989 does not automatically invalidate the notice or extinguish liability. The court must construe the statutory scheme and determine the consequence Parliament intended to attach to the breach.

Relevant considerations include the length of delay, the ratepayer’s substantial prejudice, the public interest in collecting rates, and whether reliance on the notice would be unconscionable or otherwise contrary to public law principles. Substantial prejudice may defeat recovery where it is not outweighed by the competing public interest. “Practicable” requires feasible steps within known resources; a billing authority cannot rely on its own inefficiency or failure to identify a ratepayer.

The Council claimed unpaid national non-domestic rates from Honda, Chevrolet and Martin Graham. The claims concerned leased vehicle-storage and export premises at Royal Portbury Docks and unoccupied office premises at Rivermead Court.

Each defendant argued that the Council had failed to serve demand notices as soon as practicable under regulation 5 of the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989. Honda also disputed rateable occupation and relied on European Union law. The central questions were whether late service automatically invalidated the notices, what consequence should follow from the delay, whether the Council had acted as soon as practicable, and whether each defendant had suffered substantial prejudice.

1. Applicable statutory approach. The distinction between liability under sections 43 and 45 of the Local Government Finance Act 1988 and the obligation to pay following service of a regulation 5 notice was material. The consequences of non-compliance had to be determined by reference to imputed Parliamentary intention, the language and purpose of the provision, the statutory scheme, the length of delay, prejudice and competing public interests.
2. No automatic invalidity. Following the approach in R v Soneji [2006] 1 AC 340 and Wang v Commissioner of Inland Revenue [1994] 1 WLR 1286, late service under regulation 5 did not automatically extinguish liability. The court rejected the approach in Encon Insulation Limited v Nottingham City Council [1999] RA 392 and accepted the conclusions in JJB Sports v Telford and Wrekin Borough Council [2008] EWHC 2870 (Admin) and R (Waltham Forest LBC) v Waltham Forest Magistrates Court and Yem Yom Ventures Limited [2008] EWHC (Admin) 3579 that automatic invalidity was not the statutory consequence.
3. Prejudice and public interest. A court must consider whether the delay caused real, material or substantial prejudice. Prejudice is distinct from inconvenience and must not be technical or contrived. The countervailing public interest includes collecting taxes, protecting other taxpayers and preserving local-authority revenue. Where substantial prejudice is not decisively outweighed by that public interest, recovery may be defeated. Egregious non-compliance may also make reliance on the notice unconscionable or conspicuously unfair.
4. Meaning of “practicable”. The Council had to consider whether it could have identified the premises and ratepayer earlier. “Practicable” meant feasible and capable of being achieved with known means and resources. The Council could not rely on internal inefficiency, defective inspection systems, computer errors or ignorance which reasonable inquiries would have avoided.
5. Honda. Honda was in rateable occupation because the lease gave it control and exclusive use of Main Site, while the Port Company’s rights were subordinate and subject to Honda’s permission. The rating arrangements and alleged double recovery did not alter that conclusion, and the European argument under article 35 TFEU was untenable. The delay caused substantial prejudice and made recovery unconscionable.
6. Chevrolet. Chevrolet was in rateable occupation of Daewoo 1. The Council should have identified the continued occupation and ratepayer by early 2003. Chevrolet had been unable to account for the rates in its pricing and financial planning, causing substantial prejudice. Recovery was therefore barred.
7. Mr Graham. The Council could have identified the owner of Rivermead Court through the Land Registry, its planning department or the letting agents. The delay deprived Mr Graham of the opportunity to challenge the 2000 rating list and caused substantial prejudice. Recovery was barred.
8. Disposition. The claims against all three defendants failed. Judgment was entered for each defendant.

First-instance decision. No earlier appellate decision was stated in the judgment.