Broxfield Ltd v Sheffield City Council

A court determining whether an arrangement is a sham must apply the ordinary balance of probabilities. The seriousness of an allegation, or of its consequences, does not raise the standard of proof or require unusually cogent evidence. A sham consists of acts or documents intended to give third parties or the court the appearance of rights and obligations different from those actually intended. Whether an arrangement is a sham is a question of fact. An appellate court hearing a case stated should respect findings of fact unless there was no evidence to support them or no reasonable judge could have reached them.

Broxfield Ltd appealed by way of case stated against liability orders sought by Sheffield City Council for unpaid business rates concerning Courtwood House. Broxfield contended that rateable occupation had passed to Busy Bodies Business Services Ltd under purported leases. The District Judge found that no valid lease, tenancy, licence or other contractual arrangement had been created. On amendment of the stated case, she additionally found that the arrangement was a sham.

The appeal concerned whether those findings were open on the evidence, whether any legal or equitable lease had arisen, and whether the documents could be corrected or treated as effective despite their defects.

1. Appeal dismissed. The High Court affirmed the District Judge’s findings and answered each question in the re-amended case in the affirmative, save that the court was not wrong to decline to correct the documents.

2. The definition of a sham in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, expressly approved in WT Ramsay Ltd v Inland Revenue Comrs [1982] AC 300, remains the governing legal definition. It concerns acts or documents intended to create an appearance of legal rights and obligations different from those actually intended. The concept should not be enlarged by unnecessary refinements.

3. Whether an arrangement is a sham is a question of fact. A presumption is only an evidential starting point and yields to the evidence. The court must decide whether the allegation is more likely than not. The seriousness of the allegation or its consequences does not justify elevating the standard of proof or requiring better quality evidence. The approach in Re B (Children) [2009] 1 AC 11 was applied.

4. The District Judge was entitled to find that the arrangement was an overwhelming sham. The purported leases were not executed on the stated date, were internally inconsistent, were unsupported by possession or rent, and were contradicted by the appellant’s conduct in granting licences over the property. The evidence also supported the finding that Busy Bodies was never intended to bear the rates.

5. The appellate restraint applicable to findings of fact, summarised in Perry v Raleys Solicitors [2019] UKSC 5, was satisfied. No reasonable judge could have reached a different conclusion on the evidence. There was no basis for an equitable lease, contractual tenancy or licence. Equity would not rewrite the documents fundamentally or assist a dishonest arrangement. The evidential burden properly shifted where the relevant knowledge lay exclusively with the appellant.

• District Judge Redhouse: found that no valid lease or other arrangement transferred rateable occupation to Busy Bodies and, on the re-amended case, found the arrangement to be a sham.
• High Court (Administrative Court): the stated case was remitted for clarification and amendment under section 28A of the Senior Courts Act 1981. The amended findings were affirmed and the appeal dismissed.