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AN ARTICLE by Peter Scrafton FIRRV, FCIArb, MRSA(Hon) Solicitor (Non-Practising)

April 2018.

On my menu this time are several cases which deal with matters of procedure, and one dealing with the issue of demand for hereditaments. They are coming faster than there is space to write about them.

The courts have declared that procedure is a handmaid and not a mistress, but in either case she must be respected. We have come a long way since the Common Law Procedure Act 1852 abolished the system which so often allowed form to triumph over substance; a litigant might have a really strong case but could be defeated if he went about it in anything other than a procedurally perfect way. Opponents were always ready to exploit such slips.

The courts, and now the Upper Tribunal, have recently been re-emphasising the need for parties to litigation to follow the procedural rules, but at the same time they have indicated that there can be a way back if a mistake is made; and opponents are strongly to be discouraged from seeking to exploit matters, for immediate advantage.

In Hammerson UK Properties plc –v- Gowlett (VO) [2017] UKUT 0469(LC) the Lands Chamber outlined its approach to non compliance with practice directions and case management orders. it was an opportunity for the Chamber to explain the relevance of its own practice of principles considered by the Supreme Court in BPP Holdings v HMRC [2017] 1 WLR 2945 and by the Court of Appeal in Denton v TH White Ltd [2014] 1 WLR 3926.

In Denton a three-stage approach was set out to applications for relief from sanction under CPR 3.9(1). These are to: 

  • identify and assess the seriousness and significance of the failure to comply;
  • consider why the default occurred; and 
  • evaluate all the circumstances of because so as to enable the court to deal justly with all circumstances including factors in CPR 3.9(1) (a) and (b) which emphasise the need for litigation to be conducted efficiently and at proportionate cost, and to enforce compliance with rules, practice directions and orders.

The BPP Holdings case held that all tribunals and the appellate courts above the level of the Upper Tribunal should be wary of applying or relying on the procedural jurisprudences of the English and the Welsh courts, without also taking into account those of the Scottish and Northern Irish courts. While it would be both unrealistic and unreliable for a tribunal to develop its procedural jurisprudence on any topic without paying great regard to the approach of the courts to that topic, the tribunals have different rules from the courts and sometimes require a slightly different approach to a particular procedural issue. This case and others  provide a salutary reminder as to the importance which is now attached to observing rules in contentious proceedings generally.

In the good old days, in order to obtain more time, or some other indulgence, it was often necessary to do no more than to send the Registrar a £20 fee and ask him nicely: what the applicant wanted was usually grated with the active consent of the other side, as there was very much an attitude of; “Today for me; tomorrow for you”, so that appeals carried on, sometimes for years, like comfort blankets. That approach has now gone.

The acutely minded will remember that in Denton the Supreme Court upheld an order debarring HMRC from taking further part in proceedings. the revenue had taken the line, put simply, that hey had what amounted to a statutory excuse for failing to comply with rules and that their trespasses would always be forgiven in the finest biblical manner. Some readers may have encountered this attitude!

Applying Denton to Hammerson and to the Lands Chamber, there is nothing in the procedural jurisprudence which holds that the tribunal should take an attitude different from that adopted in applications for second and subsequent applications for exertions in time for such matters as filing a notice of appeal. A stricter approach than in the past is to be taken and there is nothing in the expectation of compliance which is inconsistent with the distinctive culture or overriding objectives of tribunals. The Senior President of Tribunals was very clear about this in the Court of Appeal. Accordingly, the Lands Chamber applies the three tests laid down in Denton and repeats the warning against the “…..unduly draconian approach to relief and emphasised that there must be a limit to the permissible harshness of sanctions. Compliance is not an end in itself and compliance with rules must not be allowed to assume to greater importance than doing justice in any case”.

These principles will also apply in the Valuation Tribunal. The President and Deputy President of the Chamber, sitting together in Simpsons Malt Ltd v Jones & Ors (Valuation Officers) [2017] UKUT 460 (LC), decided two days before Hammerson, clearly had their eyes on these issues when they overturned Valuation Tribunal strikeout orders in four cases, commenting that Valuation Officers should not stand by and see cases struck out, when they believed that the rating list was inaccurate.

Another case is apparently coming along, namely St. Benedict’s Land Trust –v- Moss (VO) (RA/53/2017) about which nothing should now be said as I understand that it has been heard, but no decision has yet been given (February 2017). The appeal concerns a refusal by the Valuation Tribunal to add a party under Rule 9 of its procedure, or to apply the slip rule, which appears at Rule 39. I understand that the point has not previously been contested.

Almost a procedural matter, but really a collection case, is what I believe to be the interim decision of the High Court in Rossendale Borough Council v Hurstwood Properties (A) Ltd [2017] EWHC 3461 (Ch), decided in January 2018, of which I have not yet seen a copy, although I understand it was something of a ‘test’ case among similar claims issued in the High Court. The question for the court was whether schemes entered into by the defendants for the purposes of mitigating liability to national non-domestic rates fell outside the scope of the principle that rate payers are entitled to organise their affairs legitimately so as to avoid paying rates. The case involved consideration of the doctrine of ‘sham’ transactions, the application of the “Ramsay” approach to statutory construction and “piercing the corporate veil”. Much of this has been litigated before, but nonetheless the case will repay some study.

Turning, now, to matters of valuation, the decision in Mahmod –v- Annamalai (VO) [2018] UKUT 0020 (LC) gives an insight into the manner in which the tribunal may approach claims that a property in disrepair would not be repaired by the landlord, on the ground that the repairs would be uneconomic. The ratepayer, appearing in person and calling no independent witness, even though a building surveyor’s report had been obtained, lost.

Thomas and Davies (Merthyr Tydfil) Limited v Denly (VO) [2014] RA 515 was at the forefront of the Member’s mind, and in particular paragraphs 66 and 80 of the decision. The Member believed that the reversionary element of value should have been taken into account, and that the hypothetical landlord would be likely to repair the hereditament at the end of the contractual (five-year) term. Allowing for a discount of 50% from the rental value to reflect the state of repair (the percentage applied in Denly) the Member found that the hypothetical landlord would have found repair to have been economic at the material day. He also advised the Appellants to consider taking legal advice about the nature and extent of his repairing obligations under the underlease, which it seems nobody had considered…. Oh dear!

Last, and by no means least, I come to the case of Telereal Trillium –v- Hewitt (VO) [2018] EWCA Civ 26 which expands the application of the principle of reality by laying the groaning and clanking ghost of demand for an empty hereditament. The mantra was almost invariably that someone (never named) would take a tenancy at a full rent. The Court of Appeal has resolved this in what is a very readable judgment, in which students will recognise a number of the most famous warhorses which are brought out.

The Lands Chamber posed the question for the Court of Appeal in this way:-

“The appeal raises an issue of principle which is likely to recur in connection with substantial vacant buildings with significant rateable values. Where the evidence shows that there is no demand to occupy a hereditament which is capable of occupation, does the rating hypothesis require the valuer to assume demand that does not in reality exist?”

The answer was a resounding “No”. Hoare v National Trust [1998] RA 391 in which what is now known as the “principle of reality” was approved. Paragraphs 41-51 are particularly instructive, and I regret that I cannot go into more detail, here, but available space just does not permit this.

Coming, therefore, to the end of this piece, the wheel of fortune (la Roue) is seen still to be turning – and things simply do not stay the same.

Peter Scrafton

©J.P. Scrafton, 2018

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