Emeraldshaw Limited, R (on the application of) v Sheffield Magistrates' Court

For liability on an unoccupied hereditament, the person with the immediate legal right to actual physical possession is ordinarily the owner under the Local Government Finance Act 1988. That person is not the statutory owner where the right was granted solely to avoid non-domestic rates and carries no real or practical ability to exercise possession or bring the property back into use.

This inquiry applies without a preliminary requirement that the circumstances be unusual. The features of the schemes considered in Rossendale are neither mandatory criteria nor a checklist. Nor must the billing authority prove unlawfulness, abuse of company or insolvency procedures, or a sham.

The appellant owned two unoccupied commercial hereditaments and granted tenancies at will to a charitable company. Sheffield City Council maintained that the appellant remained liable for non-domestic rates. The magistrates’ court made liability orders after finding, among other things, that the tenant lacked a real and practical entitlement to possession.

The Administrative Court refused permission to seek judicial review. Although two challenges were arguable, it held that the challenge based on Rossendale was not and that the liability orders would therefore have been made in any event.

The appellant appealed against the refusal of permission. The central issue was whether the magistrates’ court had arguably misunderstood the scope of Rossendale when applying sections 45(1) and 65(1) of the Local Government Finance Act 1988.

1. Appeal dismissed. The challenge to the magistrates’ court’s application of Rossendale was wholly unarguable. The Administrative Court’s refusal of permission to apply for judicial review was upheld.

2. The owner of an unoccupied hereditament is ordinarily the person with the immediate legal right to actual physical possession. That person falls outside sections 45(1) and 65(1) of the Local Government Finance Act 1988 where the right was granted solely to avoid non-domestic rates and the person has no real or practical ability to exercise it or bring the property back into use. This construction reflects the statutory purpose of placing liability on the person who can decide whether the property remains empty.

3. Rossendale imposes no threshold requirement that a case be unusual before the real and practical entitlement inquiry may be undertaken. The Supreme Court’s references to ordinary and unusual cases merely recognised that a person holding the legal right to possession will usually be able to exercise it. The six features of the schemes in Rossendale were an application of the statutory test to those facts, not a checklist governing later cases. Unlawfulness or abuse of company and insolvency procedures is likewise unnecessary.

4. The district judge applied the correct test. The tenancies had to be assessed in the context of the owner’s planned demolition and redevelopment, its control of the works and future lettings, the tenant’s lack of security, and contractual restrictions on assignment, subletting and sharing possession. There was ample evidence that the tenant could neither exercise actual physical possession nor bring the properties back into use. The owner retained practical control throughout. The finding that the arrangements existed solely to avoid rates was also an integral and relevant part of the test.

5. The sham issue did not arise for decision. For guidance, a sham requires a common intention that documents should merely appear to create rights and obligations different from those actually intended. Tax avoidance commonly prompts genuine arrangements. The Ramsay principle is a rule of purposive statutory interpretation and does not require proof that the transaction was a sham.

6. Because the Rossendale challenge was unarguable, the challenge concerning sections 31(3C) and 31(3D) of the Senior Courts Act 1981 could not succeed.

1. Court of Appeal (Civil Division): The appeal was dismissed and the refusal of permission to apply for judicial review was upheld: [2025] EWCA Civ 1601.

2. Administrative Court: HHJ Klein held that the challenge based on Rossendale was not arguable. Although two other grounds were arguable, permission was refused because it was highly likely that the outcome would not have been substantially different.

3. Sheffield Magistrates’ Court: District Judge Spruce made liability orders against the appellant for unpaid non-domestic rates on 21 March 2024.