[2025] EWHC 2336 (Ch)

One might have thought that the judgment in Rossendale was so clear and comprehensive as to preclude any significant argument about the effectiveness of the schemes on the facts of these cases. However, Rossendale was decided on both agreed and assumed facts. The actual facts were explored in some detail on the material before me.

It was admitted that the motivation of PAG in granting the leases to the SPVs was solely for the purpose of avoiding liability for NDR. However, as already indicated, that is irrelevant.

There was, of course, nothing about the leases themselves which meant that they were not capable of conferring an immediate right to possession and, in another context, a real and practical right to possession. They were not shams, either, in the sense of not being genuine transactions, or being a different kind of transaction from a lease.

But it was admitted, also, that the SPVs were intended to go into liquidation immediately after the grant of the leases, or within a short period thereafter. That is relevant to the question whether the leases conferred a real and practical right to possession, because both the leases and liquidation were part of the same scheme.

Moreover, it was admitted that the only business activity undertaken by the SPVs was entering into the leases. The schemes involved the SPVs’ not occupying or carrying out any business activities on or from the relevant premises.

Nor could they have done so: they had no money or other resources with which to do so. It was said on behalf of the defendant that if the SPVs had required resources, such resources were available from PAG. It was clear from the evidence, however, that it would have been entirely a matter for PAG to decide whether to provide resources. Nor was there evidence to suggest that the SPVs ever did require or might have required resources; or that any provision had been made for the supply of such resources; or that they were entitled to require the provision of such resources; or that it was any part of the schemes that they should obtain or deploy any resources for any purpose whatever.

I am entitled to and do infer from the defendant’s decision not to call any directors of PAG to give evidence as to the availability of resources, that such evidence would not have assisted PAG. I conclude that it was never contemplated until after the event that PAG’s resources might ever have been in play.

It is perfectly true that the scheme leases afforded the SPVs the legal right to occupy the premises, or to put someone else into occupation, by way of assignment, or under letting, for example. It was essential to the schemes, however, that they should not exercise those rights, and in fact they never did so. The scheme leases provided no real benefit to the SPVs, and had no value for them. Their only value was to the landlord, to the extent that they protected it from having to pay NDR.

In answer to the claimants’ case that the SPVs were simply the creatures of the defendant, acting (to the extent they acted at all) at the direction of the defendant, the defendant pointed to the fact that each of the tenants had an active director who was paid a fee for carrying out the functions of that office and through whom the SPV could act. However, the defendants did not call an SPV director to give evidence, although it might readily have done so had it chosen. I am entitled to and do infer that had such evidence been given, its effect would have been to support the claimants’ case rather than the defendant’s. I conclude that the director’s role was simply to be on board with the applicable scheme.

Some time was spent in the evidence in considering the role of the liquidator. It is clear from the evidence of Mr Mather, a former consultant to PAG, that the liquidator, although he may have been appointed in form by the SPV, was selected by PAG, and was so selected on the basis of willingness to act in conformity with the scheme, on an indemnity from PAG.

I accept that the liquidator was involved in marketing the premises but the documentation indicates that control of this process lay with PAG, which paid for the process, and made the decisions. Mr Mather was only willing to concede that PAG had an element of control, but it went further than that. In any event, it occurred after the liquidation. On completion of successful marketing the scheme lease was terminated (rather than being assigned or sublet), and the tenant occupied under a new lease.

Accordingly, I conclude that the SPVs had no real or practical ability to exercise their legal rights to possession, because of the operation of the schemes to avoid liability for NDR.