England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		16/05/2013

Mr Justice Wyn Williams:

Introduction

1. This is an appeal by the Appellants against a decision of the Valuation Tribunal ("The Tribunal") dated 9 February 2012 whereby the Tribunal determined that the Appellants were responsible for council tax in respect of the property known as 315 Green Lane, Ilford, Essex IG3 9TL ("the premises") for the period from 1 January 2005 to 31 December 2010. The Appellants brought this appeal out of time; in their notice of appeal an extension of time is sought so as to permit the appeal to go forward.
2. The Respondent has argued the case on its merits. Mrs Hodgson, on behalf of the Respondent, has not sought to persuade the court that an extension of time should not be granted. Accordingly I grant the relevant extension of time and deal with the appeal on its merits.
3. It is common ground that an appeal can succeed only if the Tribunal erred in law when it reached its decision.

Legal framework

4. The Local Government Finance Act 1992 introduced council tax with effect from 1 April 1993. Persons liable to pay council tax are ascertained by reference to sections 6 and 8 of the 1992 Act. Section 6 provides:-

"(1) The person who is liable to pay Council Tax in respect of any chargeable dwelling and any day is the person who falls within the first paragraph of sub-section (2) below to apply, taking paragraph (a) of that sub-section first, paragraph (b), and so on.

(2) A person falls within this sub-section in relation to any chargeable dwelling and any day if, on that day –

(a) he is a resident of the dwelling and has a freehold interest in the whole or any part of it;

(b) he is such a resident and has a leasehold interest in the whole or any part of the dwelling which is not inferior to another such interest held by another such resident;

(c) he is both such a resident and a statutory or secure or introductory tenant of the whole or any part of the dwelling;

(d) he is such a resident and has a contractual licence to occupy the whole or any part of the dwelling;

(e) he is such a resident: or

(f) he is the owner of the dwelling

(3) Where, in relation to any chargeable dwelling and any day, two or more persons fall within the first paragraph of sub-section (2) above to apply, they shall each be jointly and severally liable to pay the council tax in respect of the dwelling and that day.

(5) In this Part, unless the context otherwise requires –

"owner", in relation to any dwelling, means the person as regards whom the following conditions are fulfilled –

(a) he has a material interest in the whole or any part of the dwelling: and

(b) at least part of the dwelling or, as the case may be, of the part concerned is not subject to a material interest inferior to his interest;

(6) In this section –

"material interest", means a freehold interest or a leasehold interest which was granted for a term of six months or more;"

The relevant parts of section 8 read:-

"(1) Sub-section (3) and (4) below shall have effect in substitution for section 6…..in relation to any chargeable dwelling of a class prescribed for the purposes of this sub-section.

(3) Where, on any day, this sub-section has effect in relation to a dwelling, the owner of the dwelling shall be liable to pay the council tax in respect of the dwelling and that day.

(4) Where, on any day, two or more persons fall within sub-section (3) above, they shall each be jointly and severally liable to pay the Council tax in respect of the dwelling and that day.

(6) Regulations prescribing a class of chargeable dwellings for the purposes of sub-section (1) or (2) above may provide that, in relation to any dwelling of that class, sub-section (3) above shall have effect as if for the reference to the owner of the dwelling there were substituted a reference to the person falling within such description as may be prescribed."

5. The reference in section 8(6) of the 1992 Act to "Regulations" is a reference to the Council Tax (Liability of Owners) Regulations 1992. Regulation 2 provides a number of classes of chargeable dwellings prescribed for the purposes of section 8(1) of the 1992 Act. Class C is headed "Houses in multiple occupation etc"; the class is a dwelling which

"(a) was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household; or

(b) is inhabited by a person who, or by two or more persons each of whom either –

(i) is a tenant of, or has a licence to occupy, part only of the dwelling; or

(ii) has a licence to occupy, but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of the dwelling as a whole."

Regulation 2A provides:-

"(1) In relation to a dwelling within class C in regulation (2) section 8(3) shall have effect as if, for the reference to the owner, there were substitute a reference to –

(a) the person who has the relevant material interest which is not subject to a relevant material interest inferior to it;

Or, if there is no such person –

(b) the person who has a freehold interest in the whole or any part of the dwelling.

(2) In paragraph (1), "relevant material interest" means a freehold or leasehold interest in the whole of the dwelling."

The hearing before the Tribunal

6. It was common ground that the Appellants were the registered owners of the premises during the whole of the period in question. The Respondent's case was that during that period the premises were in multiple occupation within Class C of Regulation 2 of the 1992 Regulations and that, by virtue of section 8 of the 1992 Act and Regulation 2A of the Regulations, council tax was payable by the registered owners.
7. The Appellants denied that the premises fell within Class C at any material time. Their case before the Tribunal was that throughout the period in question the whole of the premises were let to bona fide tenants and accordingly, by virtue of section 6 of the 1992 Act, it was those tenants who were responsible for council tax. Alternatively, the Appellants denied being the "owners" assuming the premises fell within Class C.
8. Neither party called oral evidence before the Tribunal. Each party submitted a number of documents and invited the Tribunal to reach factual conclusions based upon the documents and the inferences properly to be drawn from the documents.
9. The Tribunal decided that during the period 1 January 2005 to 31 December 2010 the premises fell within Class C of Regulation 2 i.e. that during the whole of the period the premises were in multiple occupation. It seems clear that the Tribunal concluded that sub-paragraph (b) of Class C was satisfied. It also decided that the Appellants were the persons responsible for paying the council tax due for that period.
10. In order to understand the basis upon which it reached the conclusion that the premises were in multiple occupation during the relevant period it is necessary to identify and describe the documentation which was relied upon by the parties.
11. The Appellants' documentation consisted of a letter dated 2 August 2011 setting out the grounds of appeal together with copies of tenancy agreements for the 7 calendar years from 1 January 2005. Each of the tenancy agreements was for an assured shorthold tenancy of the whole of the premises for a calendar year. In each of the agreements the landlord/ landlord's agent was named as Ace Consultancy, 855/857 High Road, Goodmayes, Ilford, Essex and each of the agreements named one or more than one person as the tenant(s) for the calendar year. In each agreement the name of the tenant or tenants was printed on the first page. In the letter of 2 August 2011 the Appellants asserted that the premises had been continuously rented to tenants during the relevant period although the tenants themselves changed from time to time.
12. The tenancy dated 1 January 2005 expressed itself to be between Ace Consultancy and three tenants named as Thomas Kosovcki, Adam Malodobry and Zehon Bernard Jedrzejczyk. The agreement was signed by Mr Kosovcki. It was not signed by the other two persons. The agreement dated 1 January 2006 was an agreement between Ace Consultancy and Thomas Kosovcki, Mr Lezkey and Adam Malodobry. That agreement was signed by L. Hajdek. The agreement dated 1 January 2007 was between Ace Consultancy and Ms Annet Cjruszuk and Mr Lezkey. This agreement, too, was signed by L Hajdek. The agreement dated 1 January 2008 which accompanied the letter of 2 August 2011 was made between Ace Consultancy and Ms Annet Cjruszuk and Mr Lezkey. That agreement was signed Hajdek, L. The agreement dated 1 January 2009 was made between Ace Consultancy and Mr Kanti Patel. Mr Patel signed the document. The same two parties made the agreement dated 1 January 2010 and that document, too, was signed by Mr Kanti Patel.
13. The Respondent submitted to the Tribunal a statement of its case together with a number of documents which were explained in the statement of case and referred to a series of appendices. Appendix 1 was a statement from Ms Aneta Chruszczyk. The Respondent had received this statement on 6 December 2008 and Ms Chruszczyk made the statement on that date. In summary the statement asserted that Ms Chruszczyk had lived at the premises since 1 January 2007 but only rented a room within the property. She had not been given a tenancy agreement until 1 January 2008 and on the occasion when she was given the agreement it was not signed by the landlord and she did not meet the landlord. In her statement she said that there were other persons in the house, whom she described as tenants, who rented their rooms only. The only person she named in her statement as living at the premises at the time she made her statement was Mr Lezkey.
14. At the time Ms Chruszczyk made her statement she provided to the Respondent a tenancy agreement dated 1 January 2008. This agreement was an agreement between Ace Consultancy and Ms Chruszczyk which was signed by her. It specified the period of the tenancy as being 1 January 2008 to 31 December 2008 and the premises to be let as 315 Green Lane. The rent was specified to be £750 per calendar month. The agreement was signed by Ms Chruszczyk.
15. Appendix 2 was a letter from Mr Malodobry received by the Respondent on 3 February 2009. In the letter he said that he rented a furnished room from 18 February 2006 to July 2007. There was no written tenancy agreement and the rent he paid for his room was £40 per week and collected by a man called Dipak Prohit.
16. Appendix 3 was a letter from Mr Bhogal dated 26 January 2007 which asserted that Mr Soor had assumed control of the management of the property with the aid of agents/friends one of whom was Dipak Prohit. Under cover of that letter was an investigation report made on 25 January 2007. Mr Bhogal asserted in the letter that the investigation report indicated the people who had occupied the premises since April 2004. They were Messrs. John Smith, Adam Malodobry, Zehon Jedrzejczyk and Thomas Kosovcki.
17. Appendix 4 was a record of a telephone conversation which took place on 9 September 2008 between an employee of the Respondent and someone at an unspecified valuation office. The information provided was that a Mr Peter Emmington was living in a first floor flat at a property known as 315A Green Lane. He had been doing so since 26 July 2008. The records at the valuation office showed that a visit was made to 315A Green Lane and that the visiting officer had described those premises as a 3-bedroomed house.
18. Appendix 5 was a document completed by Mr Bhogal on 28 June 2007. According to that document there were four persons responsible for payment of council tax at that time; they were John Smith, Krzysztof Adams, Zehon Jedrzejczyk and Thomas Kosovcki.
19. Appendix 6 consisted of two tenancy agreements both dated 1 January 2008 and both for the period 1 January 2008 to 31 December 2008. One agreement specified that the tenant was Ms Aneta Chruszczyk and the rent was £700 per month. This agreement was signed by her. The second document specified that the tenants were Ms Cjruszuk and Mr Lezkey and that the rent was £840 per month. This second tenancy agreement appeared to be identical to the one which the Appellants themselves produced for the Tribunal.
20. Appendix 7 consisted of tenancies for the period 1 January 2005 to 31 December 2005, 1 January 2006 to 31 December 2006 and 1 January 2007 to 31 December 2007. They had been received by the Council on 2 October 2008 and they were identical to the agreements for those years which were relied upon by the Appellants.
21. Appendix 8 was a company search in respect of Ace Consultancy Limited. Mr Soor was shown to be the director of the company.
22. It was on the basis of this documentation and the arguments presented orally that the Tribunal concluded that the premises had been in multiple occupation at the material time. In the decision letter dated 9 February 2012 the Tribunal's reasoning is short but to the point. The relevant part of the letter reads:-

"6. From the evidence presented the Panel noted the various names appearing on the copies of the leases provided but was aware that the signatures at the end of the lease did not, in most cases, match the names on the first page. It was also noted that many signatures of people stated to be in occupation did not appear on the lease.

7. The Panel were also provided with letters from several former tenants who stated that they paid rent for a room only, not the whole property. A letter from one of the Appellants was also provided where names of tenants not referred to on the leases were set out.

8. Details of a credit check on the subject property were provided by the Respondent; this provided details of the names of people linked to the subject property. It was noted that a number of names shown on the credit check were not shown on the leases provided by the Appellants.

10. Having considered the submissions presented the Panel found that the contention of the Appellants was not supported by the evidence, which was in turn contradicted by evidence from the Respondent. The Panel determined that sufficient doubt existed in the contentions of the Appellants that the appeal house was occupied by people who had a tenancy or pay rent in respect of the dwelling as a whole.

11. The Panel noted the decision in the UHU case which found that:

"The Tribunal were entitled to come to the conclusion on the factual evidence before it that the occupation of the premises fell within class C (b)(ii) and was not bound simply to look at the tenancy agreement and then look no further at the realities."

12. From this it was accepted that the Panel was not bound to only follow the tenancy agreement only but to look at the reality of what was happening on the ground. From this test it was determined that the lack of signatures on the leases by many of the people stated to be in occupation. The names of the people that were stated to be in occupation by the credit check were not shown on the leases.

13. When the statements of former residents stating that they only had rights to occupy part of the property were also taken into account it was found that on balance the property should be held to be a house in multiple occupation.

14. In conclusion it was held from the leases provided that discrepancies existed in the details of the tenants stated to be in occupation. From this the Panel found that the weight of the evidence provided supported the view that the dwelling was not occupied as a single unit and was a house in multiple occupation. The owners were therefore held to be liable for the Council Tax for the period in dispute."

The reference in the decision letter to the "UHU case" was a reference to the decision of Sullivan J (as he then was) in UHU Property Trust v Lincoln City Council 3 March 2000. I will return to that decision shortly.

23. The decision letter contains no reference to the fact that the Appellants had, in effect, disputed being the "owners" of the premises. The letter of 2 August 2011 had pointed out that Mr Soor held his interest in the premises on trust and that he had no beneficial interest in the premises. It was also pointed out that on 5.1.2006 Mr Soor had been made bankrupt so that any beneficial interest in the premises had devolved upon his trustee in bankruptcy. The Appellant's letter did not assert that Mr Bhogal had no beneficial interest in the premises. However, it did assert that he had neither managerial nor administrative control of the premises during the material period.

Discussion

Multiple occupation

24. The Appellants submit that the premises were never in multiple occupation. The premises did not consist of a dwelling which was originally constructed or subsequently adapted for occupation by persons who did not constitute a single household (sub-paragraph (a) of Class C) nor were the premises inhabited by a person who, or by two or more persons each of whom, was a tenant of part only of the dwelling (sub-paragraph (b) of Class C). The Appellants submit that for each of the relevant calendar years the whole of the premises were let to the persons named in the tenancy agreement for that year. The rent in respect of the premises was paid to Ace Consultancy in the full amount specified in the tenancy agreements produced by the Appellants.
25. The Appellants further submit that the Tribunal's reliance upon the decision of Sullivan J in UHU Property Trust v Lincoln City Council was misplaced. That decision, submit the Appellants, was a decision very much upon its own facts as the subsequent decisions in Watts v Preston City Council [2009] EWHC 2179 (Admin) and Muhammad Naz v Redbridge London Borough Council 19 April 2013 demonstrate. Essentially, submit the Appellants, the Tribunal should have accepted that for the whole of the period in question the whole of the premises was let to the persons specified as being the tenants in the tenancy agreements produced by the Appellants.
26. In Watts v Preston City Council Langstaff J held:-

"In my view, where the parties set out liability for rental payment in a written agreement which is not a sham, it would be an exceptional case that those liabilities should not be the liabilities recognised by a Tribunal. That there may be exceptional circumstances is demonstrated by the facts of the UHU case. The UHU case, however, was, as Sullivan J accepted, truly an exceptional one. It appears from the ex tempore judgment which he delivered that there were conflicting documents signed by the landlords and tenants. There was said to be a tenancy agreement never in fact shown to the Tribunal in that case, which imposed a liability on a joint basis, but there were forms returned to the Council separately by the landlord and by the tenant dealing with the rental payment for which each was liable. The landlord's form identified a particular individual as renting a particular room, and not the whole of the property. It identified that individual as paying a rent which was a quarter of the total rent. When an individual left, as many did, because the tenants there were not students but were homeless, needy people, usually unemployed, who represented a fluctuating population within the property, no attempt was made to recover rent either from him or from the remaining occupants. Each occupant was simply, in practice, responsible for his own share of the rent.

13. The Tribunal read the documentation as showing the rents were charged on an individual basis in respect of each tenant, as opposed to in respect of the property as a whole. Although Sullivan J does not express it in this way, it does appear that the documentary material signed by both parties and relating to the property was conflicting. Where there is a conflict of documentary evidence setting out the right and responsibilities of the parties, it might be expected that regard would be had to what is happening as demonstrating which of the documents represented the true position."

Later in his judgment Langstaff J concluded:-

"18. The issue under Class C(b)(ii) is a legal one. Is the tenant liable to pay a rent or licence fee in respect of the dwelling as a whole? Where there is a joint tenancy agreement which is not a sham, and which is entered into on a basis of fact which demonstrates that it was, or was probably, entered into as a genuine agreement at the time, the terms of it will regulate the liability as between tenants and landlord for the payment of rent….."

27. In Naz v Redbridge London Borough Council David Holgate QC, sitting as a High Court Judge, held that the approach taken in Watts was normally applicable in determining whether or not the criteria in Class C (b) had been satisfied and that it would only be in exceptional cases, such as in the UHU case, that it would be right to conclude that a written tenancy agreement did not in fact represent the true liabilities between the parties.
28. In the instant case, without doubt, the starting point for the Tribunal was the tenancy agreements relied upon by the Appellants. Upon the assumption that the agreements were genuine, they demonstrated, conclusively, that during the relevant period the whole of the premises were let to named tenants. Put simply, if the agreements were genuine the premises could not have been in multiple occupation during any part of the period for which Council Tax was claimed.
29. There can be no doubt, in my judgment, that the evidence adduced on behalf of the Respondent cast considerable doubt upon the genuineness of the agreements. In reaching that conclusion the following documents, in particular, are significant:-

"(a) the letter dated 26 January 2007 from Mr Bhogal to the Respondent together with the investigation report enclosed with the letter (appendix 3).

(b) the three different tenancy agreements which existed for the calendar year commencing 1 January 2008.

(c) the statement made by Ms Chruszczyk dated 6.12.2008.

(d) the letter from Mr Malodobry received 3 February 2009."

30. Many of the agreements specified two or three persons as the tenants; yet each of those agreements were signed by one person. Further, in respect of some of those agreements the name of the person signing the agreement was different from any of the named tenants. Set against the context of the documents referred to in the preceding paragraph these features of the tenancy agreements were bound to raise suspicions.
31. I appreciate, of course, that Mr Soor explained to me that each of the signatories to the tenancy agreement was, as a matter of fact, the tenant or one of the tenants of the premises (despite the apparent difference in name) but, importantly, before the Tribunal there was no oral evidence given on oath to confirm those submissions.
32. I have reached the clear conclusion that the Tribunal did not err in law when it decided that it should consider the genuineness of the tenancy agreements produced by the Appellants given the evidence adduced by the Respondent. Further, I am satisfied that the Tribunal was entitled to conclude that it was not satisfied that the agreements were genuine in the face of the evidence which tended to prove the contrary. The Tribunal was faced with a conflict in the documentary evidence which was available and it was necessary for the conflict to be resolved.
33. During the oral submissions made by Mr Soor on behalf of both Appellants he complained that the Respondent had failed to disclose the documentation upon which it relied until shortly before the hearing at the Tribunal and that, in consequence, the proceedings before the Tribunal were unfair to the Appellant. In the light of this submission I considered it appropriate to permit the Respondent to adduce evidence to show when the documentation was sent to the Appellants. I have received copy correspondence which shows that the Respondent sent its statement of case and supporting documentation to the Tribunal and the Appellants on 6 January 2012. The hearing before the Tribunal took place on 26 January 2012 and, in my judgment, it is clear that the Respondent submitted its documentation to the Tribunal and the Appellants within the period specified in the relevant procedural rules.
34. Perhaps, more importantly, there was no suggestion on behalf of the Appellants that they had protested to the Tribunal that they were disadvantaged because they had not received the Respondent's documentation until about two weeks before the hearing. As far as I am aware, the Appellants did not seek time to contradict the evidence upon which the Respondent relied; they did not suggest to the Tribunal that it should not consider the Respondent's evidence. In my judgment there is no basis upon which I can conclude that the Tribunal acted unfairly towards the Appellants by reason of its willingness to receive the Respondent's documentation and act upon it.

Ownership

35. The effect of section 8(3), (4) and (6) of the Act is that the owner or owners of a house in multiple occupation shall be liable to pay the council tax in respect of such a dwelling unless the Regulations provide that a different person should be liable. For the purposes of the Act an owner is defined by reference to section 6(5) and (6) of the 1992 Act - see paragraph 4 above.
36. Regulation 2A of the 1992 Regulations is set out in paragraph 5 above. By virtue of this Regulation the person liable to pay the council tax is the person who has a relevant material interest which is not subject to a relevant material interest inferior to it or, if there is no such person, the person who has a freehold interest in the whole or any part of the dwelling. For the purposes of this Regulation "relevant material interest" means a freehold or leasehold interest in the whole of the dwelling.
37. At all material times the Appellants had a freehold interest in the whole of the dwelling. They were named as joint registered proprietors in the Land Registry and they have never denied that they owned the freehold interest in the premises.
38. The Appellant Mr Bhogal, does not deny that he owns a share in the beneficial interest in the premises. Nonetheless he maintains that he should not be liable for Council Tax during any part of the relevant period because he has played very little if any part in the control or running of the premises.
39. The fact that Mr Bhogal has played a limited role in the running of the premises or in controlling how it is used is no basis for concluding that he is not liable for the Council Tax during the period in question. No authority has been produced to me which suggests that the owner of the freehold interest in the premises in question is to be excused liability for Council Tax in respect of a house in multiple occupation simply by virtue of the fact that he plays very little part in the running or control of the premises.
40. The Appellant, Mr Soor, takes a different point. He submits that he had no beneficial interest in the premises at the material time (which has never been disputed) and he submits that a person with no beneficial interest in the premises cannot be liable for council tax. He relies upon what he claims is the general presumption that a person should not be liable to taxation in respect of property in which he has no beneficial interest. He produced no authority in support of that assertion.
41. It seems to me that the liability for council tax is dependent upon the statutory provisions which I have set out at paragraphs 4 and 5 above as summarised in paragraphs 35 and 36. The liability for council tax of premises in multiple occupation is imposed upon the person who has a freehold interest in the whole of the dwelling unless there is some relevant inferior interest. There was no relevant inferior interest in this case at any material time and accordingly the person holding the freehold interest is the person liable to pay council tax.
42. The phrase freehold interest is a legal term of art. It describes one of the two legal estates in real property. By defining ownership by reference to the person or persons holding the freehold estate in the relevant premises Parliament clearly intended that liability for council tax in respect of premises within Class C should fall upon the owner the legal estate in the premises i.e. the registered owner. If there is more than one such owner they are jointly and severally liable – see section 8(4) of the Act.
43. It follows that this appeal must be dismissed.
44. I propose to hand down this judgment at 0945am on Thursday 16 May 2013. There need be no attendance by the parties. If the Respondent seeks its costs of the appeal it should submit a costs Schedule to my clerk by 4pm 14 May 2013 and if the Appellants wish to oppose an order for costs in principle or the amount which is claimed they should provide written observations by 4pm 15 May 2013. I will then make an appropriate order when the judgment is handed down.