[2025] EWHC 2336 (Ch)

This was the trial of two ‘lead’ claims for the recovery of national non-domestic rates (“NDR”) and declarations that certain schemes designed to avoid or mitigate the incidence of NDR are ineffective for the purpose. The claimants are billing authorities with responsibility for the recovery of NDR within their statutory areas. The defendant in both of these claims is a property investment and development company.

These are two of a large number of claims for such relief issued in the High Court. They have a lengthy procedural history including, importantly, a decision of the Supreme Court in Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16; [2022] AC 690. On 5 May 2023, at a hearing attended by Counsel for the claimants, and by leading Counsel for the defendants, in 37 such cases I directed that all those claims should proceed in the Business and Property Courts of the High Court in Liverpool, Business List (ChD), and that all of them should be stayed pending final determination of three lead claims, which should be tried together. The three lead claims were Wigan Council v Property Alliance Group Limited D30LV344 (now PT-2024-LIV-000040), Trafford Council v Property Alliance Group Limited (now PT-2024-LIV-000041) and Bradford v Inverworth Ltd D30LV348 (now PT-2024-LIV-000042). The latter claim settled shortly before trial.

The NDR avoidance schemes involved are varieties of what may be called a liquidation scheme. The scheme provider incorporates or procures the incorporation of a special purpose vehicle (“SPV”) to which the owner of an unoccupied business property grants a scheme lease of that property. The purpose of doing so is to make the SPV the person entitled to possession of the property and so, for the purposes of NDR, the owner of the property, and thus liable for NDR in respect of it. The SPV does not, of course, occupy the property under the scheme lease. On or shortly after the grant of the scheme lease, the SPV is placed into members voluntary liquidation (“MVL”). For as long as the SPV remains in liquidation, it can seek to rely on the exemption from NDR in respect of property whose owner is a company which is being wound up voluntarily under the Insolvency Act 1986.

If operative, the effect of the schemes is that no one is liable to pay NDR in respect of the unoccupied property for as long as the SPV is in liquidation and the scheme lease continues. If an occupier for the property is found, the scheme lease is terminated.

Property Alliance Group Ltd (“PAG”) and others have developed varieties of this scheme. In its first iteration (‘Scheme 1’), the SPV goes into liquidation, but no liquidator is ever appointed. Wigan Council v Property Alliance Group Limited is an example of Scheme 1. In May 2011, the Secretary of State presented petitions against the Scheme 1 SPVs to wind them up on public interest grounds. PAG, the operator of Scheme 1, did not oppose the petitions, and on 27 July 2011 the SPVs were ordered to be wound up.

The second iteration (‘Scheme 2’) does involve appointing liquidators upon entry into MVL. The liquidators do not, or do not immediately, disclaim the scheme leases. Trafford Council v Property Alliance Group Limited is an example of Scheme 2. In December 2013, the Secretary of State presented a petition against the operator of Scheme 2, PAG Management Services Ltd (“PAGMSL”), a subsidiary of PAG. PAGMSL opposed the petition, but was wound up following the judgment of Norris J in re PAG Management Services Ltd [2015] EWHC 2404 (Ch).

The third iteration (‘Scheme 3’) provides for the SPV to be entitled to a determination premium under the scheme lease, which increased in value the longer the lease was not disclaimed, with a view to giving the liquidator a basis for not disclaiming. Winding up petitions in relation to Scheme 3 companies were issued in 2018 but did not succeed in the High Court (re PAG Asset Preservation Ltd [2019] EWHC 2890 (Ch); [2020] BCC 167, a decision of HHJ Stephen Davies, whose decision was upheld by the Court of Appeal [2020] EWCA Civ 1017; [2020] BCC 979). Bradford v Inverworth Ltd was an example of Scheme 3, but the parties reached agreement in that case shortly before this trial, and accordingly it does not fall to be decided in this judgment.

The Wigan claim relates to three hereditaments entered in the relevant rating list as Unit 5, Unit 5B and Unit 5C, all located on the South Lancs Industrial Estate, Lockett Road, Ashton-in-Makerfield, Wigan, Lancashire. The claim in respect of Unit 5 is for £113,035.51 for the period from 25 May 2012 to 16 March 2014. That in respect of Unit 5B is for £64,805.37 for the period from 22 May 2008 to 14 January 2010. That for Unit 5C is for £1,773.50 for the period from 15 January 2010 to 31 August 2010.

The Trafford claim relates to the following five hereditaments (the “Trafford Hereditaments”) entered in the relevant rating list: (i) Clarke Industrial Estate, St Modwen Road, Trafford Park, Manchester, M32 0ZE (“Clarke Industrial Estate”); (ii) Ground Floor, Corner House, Cross Street, Sale, M33 7JN (“Ground Floor Corner House”); (iii) Unit 2, Atlantic Point, Atlantic Street, Altrincham, Cheshire, WA15 5DH (“Unit 2 Atlantic Point”); and (iv) Pt 1st Floor (“Pt 1st Floor”) and Suite B (“Suite B”), Westgate House, 44 Hale Road, Hale, WA15 9RH. The claimed liability periods (the “Trafford Liability Periods”) and corresponding claimed amounts are:

PAG is sued on the basis that the schemes are ineffective to make the SPVs liable as owners of the properties concerned, and that accordingly PAG is the owner and liable for NDR.

PAG denies liability principally on the ground that Scheme 1 as applied to the Wigan claim and Scheme 2 as applied to the Trafford claim rendered the SPVs liable as owners (and not PAG) but then exempt, as companies in liquidation (“the liability issue”). It also claims that Wigan and Trafford failed to serve valid demand notices so that no duty to pay NDR ever arose, even if there were a liability (“the demand notice issue”). There are also specific points relating to particular hereditaments.