Rossendale Borough Council v Hurstwood Properties (A) Ltd & Ors (and linked Wigan Council v Property Alliance Group Ltd)

This appeal concerned schemes to avoid liability for National Non-Domestic Rates (NDR) by granting leases of unoccupied hereditaments to single-purpose companies (SPVs) which were then wound up or struck off. Two issues were central: (i) whether the corporate veil of the SPVs could be pierced so as to treat the defendants as owners for NDR purposes; and (ii) whether the leases should be disregarded by application of the Ramsay line of statutory construction and purposive interpretation. The Court of Appeal held that piercing the corporate veil could not be extended to these cases beyond the narrow "evasion" principle as explained in Prest v Petrodel; and that the Ramsay approach did not justify treating the SPV tenants as not owners because section 45 and section 65(1) of the Local Government Finance Act 1988 require identification of the person entitled to possession, a legal concept satisfied by a valid lease. Accordingly, the claims were struck out.

The local authorities sued to recover NDR from freehold or leasehold proprietors who had granted short, uncommercial leases to newly incorporated SPVs. The SPVs carried no trade and shortly after grant were either placed into members' voluntary liquidation or dissolved. The schemes relied upon an exception in the Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008 (regulation 4(k)) excluding certain unoccupied properties whose owner was a company being wound up. The claimants pleaded alternative causes of action: that the SPVs were nullities or should be disregarded by piercing the corporate veil; that the leases were shams; or that the leases should be disregarded under the Ramsay purposive construction approach so as to keep liability on the defendants.

The cases came before HHJ Hodge QC on strike-out applications under CPR 3.4(2)(a). The judge allowed the parts of the claims based on piercing the corporate veil to proceed but struck out the Ramsay-based pleas and the sham allegations. Both sides obtained permission to appeal certain points to the Court of Appeal. On appeal the Court addressed two questions: (i) whether Prest v Petrodel permitted development of the veil-piercing doctrine to treat defendants as remaining under an existing liability for NDR despite grant of valid leases to SPVs; and (ii) whether a Ramsay purposive construction could treat the SPV leases as irrelevant to statutory ownership for NDR.

The Court of Appeal concluded (i) that Prest confines veil piercing to the narrow evasion principle and that the day-by-day accrual of NDR meant there was no existing liability of the defendants during the currency of valid leases which could have been evaded by interposing a company; and (ii) that the Ramsay line is engaged only where purposive construction of the taxing (or charging) provision requires disregarding artificial steps, but here section 45 and the definition of "owner" in section 65(1) require identification of the person entitled to possession, a legal concept satisfied by a valid tenancy. The Ramsay approach therefore could not be used to reattribute ownership to the defendants.

The Court consequently allowed the defendants' appeals on the veil-piercing point and dismissed the claimants' appeals on the Ramsay point, ordering the claims struck out in their entirety. The judgment summarises the authorities (including Prest, Ramsay, Barclays Mercantile (BMBF), UBS and others) and emphasises the narrowness of any extension of veil-piercing and the primacy of statutory construction when Ramsay is invoked.

Appeal allowed in favour of the defendants; claimants' appeals dismissed. The Court held that Prest limits piercing the corporate veil to the narrow evasion principle and that liability for NDR accrues day by day so there was no existing liability of the defendants that had been evaded by interposition of SPVs; and that the Ramsay purposive approach could not be used to disregard valid leases because section 45 and the definition of "owner" in section 65(1) are concerned with the legal entitlement to possession, which a valid lease confers. Therefore the pleaded Ramsay and sham arguments could not survive strike-out and the proceedings were struck out in their entirety.

Appeal to the Court of Appeal from HHJ Hodge QC sitting in the Chancery Division, Liverpool District Registry: [2017] EWHC 3461 (Ch). The Court of Appeal heard the matter with linked appeals and delivered the approved judgment at [2019] EWCA Civ 364.