Onus of Proof in Business Rates Complaints

Author: Simon Hill
In: Article Published: Sunday 16 February 2020

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Where a Local Authority (the ‘Billing Authority) applies [1] by way of complaint to the Magistrates Court for a liability order against an alleged ratepayer, for allegedly due but unpaid, national non-domestic rates (‘Business Rates’), the Magistrates Court will issue a summons requiring the alleged ratepayer to attend the Magistrates Court to answer the complaint (the ‘Complaint’). In England, this happens pursuant to regulation 12(2) in Part III to Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations (SI 1989/1058) (the ‘Regulations’), which reads:

‘The application is to be instituted by making complaint to a justice of the peace, and requesting the issue of a summons directed to that person to appear before the court to show why he has not paid the sum which is outstanding.’

Further, by reg.12(5) of the Regulations:

‘The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid.’

Whether the justices, the Magistrates Court, is so ‘satisfied’, will involve: (i) the burden of proof/onus of proof; and (ii) the concept of ‘weight’ and the weighing up of the evidence. Within this, an important issue for both the complainant Billing Authority and the defendant alleged ratepayer, will be, at any given time during the Complaint’s progress, who bears the onus of producing evidence in support of their position, otherwise the Magistrates Court will find against them.

This article will consider the onus of proof and 2 cases in detail, Ratford v Northavon District Council [1987] 1 QB 357 (Slade and Ralph Gibson LJ and Sir John Megaw) (‘Ratford’) and Pall Mall Investments v Camden LBC [2013] EWHC 459 (Admin) (Holman J) (‘Pall Mall’). The earlier case, Ratford, is under the old General Rate Act 1967 (now repealed[2]) but:

(i) the provision under review was very similarly worded. In Pall Mall, Holman J said, at paragraph 18 ‘The actual wording of that part of the [Regulations] is not identical to the wording of section 97(1) of the General Rate Act 1967, but appears to be to exactly the same effect’; and

(ii) Ratford’s key principles were carried forward by Pall Mall into Business Rates. Holman J said, at paragraph 18 ‘…insofar as the earlier authorities reflect or are based upon the language of section 97(1) of the General Rate Act 1967, they are equally in point, albeit that the relevant provision is now regulation 12(2) to which I have referred.

It is therefore convenient to start with Ratford.

Ratford

In Ratford, on 28.2.83, a rating authority, Northavon District Council (the ‘Council’) had made the rate, and had duly published it the following week. The rate was due on 1.4.83. Initially, the Council addressed a demand for payment for a particular hereditament, a certain premises on an industrial estate (the ‘Premises’), to a company called Sabre Tooling Ltd (the ‘Company’). However, the Company had given a debenture to a bank, and on 5.4.83, the bank exercised a power within the debenture and appointed receivers (the ‘Receivers’) over the Premises. On 6.4.83, the Receivers notified the Council of their appointment, and the Council amended its ratings records, marking the Receivers, personally, as the occupiers of the premises from 5.4.83. On 2.6.83, the Council sent: (a) a demand for rates to the Company for the period to 4.4.83, and (b) a demand for rates for the period 5.4.83 to 31.3.84, to the Receivers.

The Receivers made no payment, and on 21.7.83, the Council preferred a complaint to the Magistrates Court under section 97(1) of the General Rate Act 1967, seeking, not a liability order, but to enforce by distress (by applying for the issue of a warrant of distress[3]) against the Receivers, asserting that the Receivers, though being persons duly rated and assessed in the general rate in question, had not paid it.

Section 97(1) of General Rate Act 1967, so far as material, provided:

'The proceedings for the issue of a warrant of distress … may be instituted by making complaint before a justice of the peace and applying for a summons requiring the person named in the complaint to appear before a magistrates' court to show why he has not paid the rate specified in the complaint.’

On 22.9.83, the Receivers, caused the company to dispose of the property to another (foreshortening the Receivers liability, to 5.4.83 to 22.9.83 period).

At the first hearing in the Magistrates Court on 1.11.83, '...the [Council] proved that the rate was duly made and published, that it had been duly apportioned in accordance with section 18 of the Act of 1967, and that the apportioned rate had been due demanded of the [R]eceivers and not paid.’ (at 364G)

The justices in the Magistrates Court accepted the submission that ‘In the circumstances, the council …had established a prime facie case against the [R]eceivers that they were the rateable occupiers and that the onus of proof lay on the [R]eceivers to show that they were not liable to pay the rates.’ (at 364G). The justices ‘held that the onus was upon the [R]eceivers to show that they were not liable’.

At a resumed hearing on 22.11.83, the Receivers argued that, on the basis of evidence contained in an agreed statement of facts and the relevant documents (namely, the debenture, appointment and 6.4.83 letter), the Receivers never entered into rateable occupation of the premises. However, the Receivers chose not to give evidence and no evidence was called on their behalf.

The justices found as a fact that the Receivers were occupiers of the rateable property and were liable for the rates. In essence, ‘(i) they regarded the onus of proof as falling throughout all the proceedings on the [R]eceivers to show that they were not in rateable occupation of the premises; and (ii) they considered that the [R]eceivers had not discharge this onus on the available evidence’ (at 366B)

The Receivers appealed by way of case stated to Kennedy J, who in turn was appealed by the Receivers to the Court of Appeal.

In the Court of Appeal, after consideration of Des Salles d’Epinoix v Kensington and Chelsea (Royal) London Borough Council [1970] 1 WLR 179, Forsythe v Rawlinson (1980) 21 RVR 97 and Verrall v Hackney London Borough Council [1983] QB 445, Slade LJ in Ratford said, at 369G:

‘On the basis of these authorities and on general principle, I would derive the following propositions of law as to the burden of proof in rating cases:

(1) A rating authority will not be justified in applying for a summons against a person under s 97(1) of the 1967 Act if it has no reasonable grounds for believing that he is or may be in rateable occupation of the premises in question if it were to decide to apply for a summons in such circumstances, its decision would be open to judicial review. This I infer is what Donaldson LJ had in mind in saying in Forsythe v Rawlinson at 98 that 'the rating authority is only entitled to issue a complaint against people who are within the category of those who may prima facie be liable for the rates'. Thus, though for present purposes I find it unnecessary to express any concluded view on this point, it may be that s 97(1) must be read subject to the implicit qualification that it would place no onus on a person who received a summons which so far lacked any reasonable basis that the decision to issue it could be successfully attacked on Wednesbury grounds (see Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 All ER 680, [1948] 1 KB 223). This I infer is what Lord Parker CJ may have had in mind in saying that s 97(1) contemplates that 'assuming that there is prima facie evidence that he is the rateable occupier … it is for him then to appear and show for one reason or another why he has not paid' (Des Salles d'Epinoix v Kensington and Chelsea Royal Borough [1970] 1 All ER 18 at 21, [1970] 1 WLR 179 at 183).

(2) Even if this implicit qualification to s 97(1) exists, it can, in my opinion, only apply in a case where on the facts known to the rating authority the person named in the complaint could not have been reasonably regarded by the authority as a reasonably possible candidate for the position of rateable occupier.

(3) Subject to (1) and (2) above, at the hearing of a summons under s 97(1), all the rating authority has to show in the first instance is that (a) the rate in question has been duly made and published (b) it has been duly demanded from the respondent, and (c) it has not been paid. If these three things are shown, the burden then falls on the respondent to show sufficient cause for not having paid the sum demanded (see Verrall v Hackney London BC [1983] 1 All ER 277 at 283, [1983] QB 445 at 459 per May LJ). The question whether a person who appears to be in occupation of a particular property is in actual occupation of it will be peculiarly within his knowledge. It seems to me probable that the legislature, in enacting s 97(1), would have contemplated that the burden of proving a defence based on non-occupation of the property would in the first instance fall on the respondent.

(4) However, the standard of proof will be merely that of the balance of probabilities, and in Donaldson LJ's words in Forsythe v Rawlinson at 98, 'like all cases of the burden of proof in litigation, it is a swinging burden'. As the evidence of varying weight develops before the magistrates, the eventual burden of proof will, in accordance with ordinary principles of evidence, remain with or shift to the person who will fail without further evidence (see, for example, 17 Halsbury's Laws (4th edn) para 15).’

Ratford was followed by Burnett J in North Somerset DC v Honda Motor Europe Ltd [2010] EWHC 1505 (QB).[4]

On the facts in Ratford, Slade LJ accepted that ‘neither the appointment of the [R]eceivers by the bank…nor the taking over by the [R]eceivers, when appointed, of the management of the company’s affairs, was necessarily sufficient to render the [R]eceivers rateable occupiers in the place of the company’ (at 371A). However, from 6.4.83 letter, ‘…the council knew that the rateable occupiers must be either the company or the [R]eceivers. Their decision to invoke the section 97 procedure against the [R]eceivers could not…have been successfully attacked by Wednesbury grounds.’ (at 371C; see also 378D). Consequently, before the Magistrates Court, ‘…the onus of proof, at least in the first instance…fell on the [R]eceivers to show that no change of rateable occupation had taken place.’ (at 371D).

The Court of Appeal found that the Receivers’ had prima facie discharged this burden, by producing evidence that while they had been empowered to take possession, they had not been obliged to take possession, and further that in carrying out their activities, they should be deemed to be the agents of the company. With that shown, the onus had shifted again, onto the Council, to show that the Receivers dispossessed the company. But the Council had failed to displace this onus, as there had not been sufficient evidence before the justices to justify a finding that the Receivers dispossessed the company (the full reasoning is in the endnote[5]).

The Court of Appeal concluded, at 380A, that: (i) in the circumstances established by the evidence, the onus of proof had not lay on the Receivers; and so (ii) the Receivers were not 'occupiers' of the property for the purposes of rating within the meaning of the General Rate Act 1967.

That the burden of proving that the rates have not been paid by an alleged ratepayer, lies on the Billing Authority, was further confirmed by the Court of Appeal in Tower Hamlets LBC v Fallows [1990] RA 255 ('Fallows').

Pall Mall

In Pall Mall, a property in Hatton Garden, London (‘the Property’) had at all material times been unoccupied and so, liability for any Business Rates due fell upon the person entitled to possession of it. Pall Mall Investments Ltd (‘PMIL’) where the freeholders of the Property and so were liable for failure to discharge the obligation to pay Business Rates for the Property unless instead, another person had been entitled to possession of it during the liability period (1.4.09 to 31.3.11), that is, another person had held, throughout the relevant liability period, a leasehold interest carved out of the freehold.

From an early stage, PMIL produced a document that purported to be a lease granted as from 1.4.09 to Lonia Limited (‘Lonia’), without doing any more. The billing authority, London Borough of Camden (‘Council’) made it clear the Council did not accept that piece of paper as being an authentic lease. Following the summons (16.2.11), summoning a hearing (17.3.11), the Magistrates Court made 2 sets of directions (7.4.11 and 12.5.11), each in turn requiring (amongst other things) PMIL to serve its witness statements. PMIL did not serve any witness statements (or statements of evidence) at all.

At the 31.5.11 hearing before DJ Henderson in the Magistrates Court, only a solicitor-advocate and a surveyor (to assist the solicitor-advocate on technical ratings matters) attended for PMIL. No evidence on oath was called by the Council or PMIL. It had not been in dispute, and the DJ found, that the statutory requirements were satisfied: (a) The rate in question had been properly set (duly made and published); (b) the rates had been duly demanded by the Council from PMIL (in proper form and reminders sent in proper form); and (c) it had not been paid (see paragraphs 2,10 and 17).

PMIL relied upon the ‘lease’ and had argued that there was no evidentiary basis upon which the court could conclude that the ‘lease’ did not create a tenancy. Against this, while the Council had not objected to the ‘lease’ piece of paper being received by the DJ, the Council had clearly challenged the authenticity, validity and legal effect of the ‘lease’. As to the ‘lease’, the DJ noted:

a. It was undated;

b. The signatures were illegible;

c. It comprised one side of A4 paper;

d. There was no reference to liability for rates;

e. It did not contain the detail generally found in a commercial lease.

And so he was not satisfied on a balance of probabilities that the lease was genuine. PMIL appealed by way of case stated.

The appeal came before Holman J. After considering Ratford and Westminster City Council v Tomlin [1990] 1 All ER 920, National Westminster Bank PLC v Rosemary Doreen Jones [2001] 1 BCLC 98 ('Rosemary'), Holman J said, at paragraph 19:

‘It seems to me…that once the primary facts had been established or admitted there was an evidential burden which “swung” or “shifted” to [PMIL] to show that they were not in rateable occupation.’

Holman J then dealt with the contention, that:

(i) the ‘…mere production of the piece of paper headed “Lease” by [PMIL’s solicitor advocate] was, and must be, sufficient to discharge that particular burden, so that the evidential burden then “swung” or “shifted” back again onto [the Council] to establish (albeit on the balance of probability) that the “Lease” was not genuine or authentic.’ (paragraph 19)

(ii) ‘…the starting point has to be that the piece of paper headed “Lease” must be taken at face value according to its terms.’ (paragraph 20).

(iii) The “Lease” was either : (I) genuine; (II) a forgery; or (III) a sham, and that ‘…even in a case which falls to be decided on the balance of probability the law requires cogent evidence from any person or party who contends that a document is a forgery or a sham.’ (paragraph 21).

Though PMIL placed reliance on Neuberger J in Rosemary, Holman J said Neuberger J’s observations[6] in Rosemary needed to be understood in their context. In Rosemary, ‘…there was a considerable evidential substratum against which the judge was able to consider whether or not the agreements were “sham”’ (paragraph 22) however, in Pall Mall, ‘[t]he situation was…frankly, a great deal more nebulous’ (paragraph 23) - the Council not expressly having identified or asserted the “Lease” was a sham or forgery - and the DJ simply having identified ‘…a number of features which raised in his mind serious doubts about the real authenticity of the “Lease” and led to his conclusion that he was not satisfied that the lease was “genuine”’ (paragraph 23).

Then Holman J said, at paragraphs 24 to 26:

‘It seems to me that [PMIL] made a choice and a decision in this case. They had been given an ample opportunity by the two sets of directions that I have described above to file evidence and/or call a witness or witnesses as to the making and signing of the “Lease” and the surrounding circumstances. For instance, whoever it was who purportedly signed on behalf of [PMIL] could have made a statement evidencing and describing how he or she had signed the document and identifying his signature; evidencing and describing the circumstances in which the other officer of [PMIL] did so; and perhaps evidencing and describing the circumstances in which, the directors of Lonia…did so and indeed naming them.

Instead, they chose simply to hand up a piece of paper. [The Council] had already clearly pointed out in correspondence a number of question marks in relation to that document. [The Council’s solicitor] clearly repeated those points to the district judge and there is nothing at all in [(a) to (e)] that could possibly have taken [PMIL’s solicitor advocate or PMIL] by surprise. The points made are all obvious ones derived simply from looking at the piece of paper.

In my view, this appeal boils down... to the concept of “weight”. That was essentially a matter for the district judge. He felt unable to attach any significant weight to a piece of paper which was simply proffered without any supporting written or oral evidence at all.’

As to what weight ought to be attributed to the ‘lease’, Holman J ruled, at paragraph 28, that it had been ‘…a matter for the [DJ] to decide how much weight properly to attach to the piece of paper headed “Lease”…’ and that he had been ‘… entitled to conclude that he could not attach enough weight to it to swing the evidential burden back onto [Council]’.

Consequently, at paragraph 27, Holman J held that the DJ had not been wrong when the DJ had found that:

(i) there was insufficient evidence to conclude that the purported ‘lease’ was adequate to demonstrate a transfer of the Property; and

(ii) PMIL had failed to satisfy the DJ on the balance of probabilities that PMIL were not entitled to ‘occupation’ (meaning possession, technically) of the Property.

The appeal was dismissed.

Conclusion

On an application by way of Complaint, the initial burden is on the Billing Authority to establish 3 statutory requirements: (a) the rate in question has been properly set (multiplier made); (b) the rates have been duly demanded by the Billing Authority from the alleged ratepayer (in proper form and reminders sent in proper form); and (c) it has not been paid (see Honda and Fallows). 

Once the Billing Authority establishes the 3 statutory requirements, the onus of proof will be on the alleged ratepayer, to show why he is not liable for the Business Rates sought in the Complaint. Whether the alleged ratepayer manages to present sufficient evidence to ‘swing’ the onus back over to the Billing Authority will be a matter of what weight the Magistrates Court properly place on evidence pointing away from the alleged ratepayer being liable (typically evidence tendered by the alleged ratepayer). If successful, the onus will have ‘swung’ over to the Billing Authority, who's Complaint is liable to be dismissed unless it then produces evidence to shift the onus back over. In principle, this onus of proof may swing back and forth between the Billing Authority and the alleged ratepayer any number of times during the progress of a Complaint  This 'swinging' may carry on through case preparation and into oral evidence, but will end at the close of evidence/judgment. In practice, whether the onus does swing at all, or how may times, will depend on what evidence is produced, what it tends to show, and what weight can properly be attributed to it.

SIMON HILL © 2020

BARRISTER

33 BEDFORD ROW

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.

[1]There are some constraints on a Billing Authority’s ability to lawfully apply by way of complaint to a justice of the peace under r.12(2) of Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations (SI 1989/1058). R.12(1) and (3) provide:

(1) Subject to paragraph (3), if an amount which has fallen due under regulation 8(2) in consequence of such a failure as is mentioned in sub-paragraph (a) of that provision is wholly or partly unpaid, or (in a case where a reminder notice is required under regulation 11) the amount stated in the reminder notice is wholly or partly unpaid at the expiry of the period of 7 days beginning with the day on which the notice was served, the billing authority may, in accordance with paragraph (2), apply to a magistrates' court for an order against the person by whom it is payable.

(3) Section 127(1) of the Magistrates' Courts Act 1980 does not apply to such an application; but no application may be instituted in respect of a sum after the period of 6 years beginning with the day on which it became due under Part II.

[2]The General Rate Act 1967 was repealed by the Local Government Finance Act 1988, ss 117, 149, Sch 13, Pt I; for savings see SI 1990/777 and SI 1990/434, reg 3.

[3]Section 97(1) of General Rate Act 1967, so far as material, provides:

'The proceedings for the issue of a warrant of distress … may be instituted by making complaint before a justice of the peace and applying for a summons requiring the person named in the complaint to appear before a magistrates' court to show why he has not paid the rate specified in the complaint.’

Slade LJ at 364A, explains how liability to pay rates arose:

'Under s 16 of the General Rate Act 1967 the liability to be assessed for rates in respect of a hereditament falls on 'every occupier of property', whoever he may be. Section 96(1) of the Act, so far as material, provides:

'… if any person fails to pay any sum legally assessed on and due from him in respect of a rate for seven days after it has been legally demanded of him, the payment of that sum may … be enforced by distress … under warrant issued by a magistrates' court … ‘'

[4]In North Somerset DC v Honda Motor Europe Ltd [2010] EWHC 1505 (QB), Burnett J said, at paragraph 135:

'The starting point is the judgment of Slade LJ in Ratford & Another v Northavon District Council [1986] RA 137 . He considered the burden of proof in rate recovery proceedings where the issue was rateable occupation. A demand can only be served on someone whom the rating authority has reasonable grounds for believing is in rateable occupation. At enforcement proceedings the rating authority has to show that the rate in question has been duly made and published; that it has been duly demanded and has not been paid. If these three things are shown, the burden then shifts to the defendant to show cause why the demand has not been paid. The burden of proof is on the balance of probabilities – see page 149.'

[5]In Ratford v Northavon District Council [1987] 1 QB 357, Slade LJ said, at 378D:

(1) I respectfully agree with the justices and with the judge that the council, on receiving the letter of 6 April 1983, were justified in applying for a summons against the receivers under s 97(1) of the 1967 Act. The contents of this letter gave them reasonable grounds for believing that the receivers might be in rateable occupation of the premises, since they were within the category of those who might prima facie be liable. As appears from the authorities cited above, it is possible for a receiver to be appointed on terms which involve a change of rateable occupation (see for example the National Provincial Bank case 85 LJ Ch 106 at 112 per Astbury J).

(2) At the first hearing before the justices, the council having shown that the rate in question had been duly made and published, that it had been duly demanded from the receivers and that it had not been paid, the burden fell in the first instance on the receivers to show sufficient cause for not having paid the sum demanded.

(3) In my judgment, however, the receivers prima facie discharged this burden by showing that they had been appointed on terms which, though empowering them to take possession of the company's premises and to carry on and manage its business, did not oblige them to take possession, and further provided that in carrying out their activities they should be deemed to be the agents of the company.

(4) This much having been shown, the onus, in my opinion, shifted to the council to show that the receivers had dispossessed the company, or, to put it another way, to show that the quality of any possession of the premises which the receivers might have enjoyed was not that of mere agents. For possession held by a person in his capacity as agent is in law the possession of his principal.

(5) The agreed statement of facts placed before the justices did no more than show that the receivers had had representatives on the property from time to time during their receivership, that they had managed the company's business and authorised the payment of various outgoings, that the company had at their direction disposed of the company's assets, including, eventually, the leasehold interest in the premises, and that during the receivership they had had control of those of the company's assets covered by the debenture. However, in my opinion, the decisions in Re Marriage Neave & Co (a decision of this court), and in the National Provincial Bank case and Gyton v Palmour show that these facts are quite consistent with the company remaining in legal possession and rateable occupation of the premises.

In my opinion, therefore, there was no sufficient evidence before the justices to justify a finding that the receivers had dispossessed the company, which had unquestionably been in possession and rateable occupation of the premises up to the date of their appointment.'

[6]In Pall Mall Investments v Camden LBC [2013] EWHC 459 (Admin), Holman J said, at paragraph 21:

'He places particular reliance upon the judgment of Neuberger J in National Westminster Bank PLC v Rosemary Doreen Jones and others [2001] 1 BCLC 98. [PMIL's solicitor advocate] places emphasis upon paragraphs 36, 37 and 46 of that judgment, but the essence of the matter is encapsulated in paragraph 59 under the heading “Conclusion on Sham”. Neuberger J says:

In one sense, lawyers find it difficult to grapple with the concept of sham, presumably on the basis that, subject to questions of mistake … there is a very strong presumption indeed that parties intend to be bound by the provisions of agreements into which they enter, and, even more, intend the agreements they enter into to take effect … A sham provision or agreement is simply a provision or agreement which the parties do not really intend to be effective, but have merely entered into for the purpose of leading the court or a third party to believe that it is to be effective. Because a finding of sham carries with it a finding of dishonesty, because innocent third parties may often rely upon the genuineness of a provision or an agreement, and because the court places great weight on the existence and provisions of a formally signed document, there is a strong and natural presumption against holding a provision or a document a sham.