Judicial review challenge to liability decision for premises allegedly used for rates avoidance scheme refused as incompetent

About this case:

• Citation:
  [2025] CSOH 69
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Braid

Bridgeport Estates Ltd, the owner of premises at 14 Inglis Street in Inverness, challenged Highland Council’s decision to treat them as liable to pay non-domestic rates in respect of the property on the grounds that it was unlawful and irrational. The respondent contended that the letting arrangements were made as part of a rates avoidance scheme as defined by the Non-Domestic Rates (Scotland) Act 2020, and that in any event the petitioners’ true remedy lay in appeal under section 238 of the Local Government (Scotland) Act 1947.

The petition was considered by Lord Braid in the Outer House of the Court of Session. Thomson KC and Tosh, advocate, appeared for the petitioner and Byrne KC and Middleton, advocate, for the respondent.

Inconsistent with actions

By lease dated 1 August 2024, the petitioner let its premises at Inglis Street to Room for Faith Ltd, which in turn sub-let them to Local Faith Ltd, both at a rent of £1 with the petitioner liable to pay utilities. Prior to this date, the premises had been leased to Costa Ltd for over 24 years, and they had been advertised as available at offer in excess of £32,500. Local Faith subsequently wrote to the respondent stating that the premises would be used as a place of religious worship.

On 3 October 2024, the respondent issued a notice under the Non-Domestic Rates (Miscellaneous Anti-Avoidance Measures) (Scotland) Regulations 2023, intimating its intention to treat the petitioner as liable to pay non-domestic rates, which were £11,438.31 for the relevant period. In its final notice, the respondent explained that it considered the leases were not on a commercial basis, were significantly below the advertised rent level on the open market, and were inconsistent with the actions currently undertaken in respect of the premises.

For the petitioner it was submitted that there was no statutory right of appeal under the 1947 Act against a decision on liability for non-domestic rates, necessitating judicial review. Even if there was such a remedy, it would not be effective as the respondent would in effect be judge in its own cause. Whether judicial review was available should properly be understood as an exercise of the court’s discretion, rather than as a question of competence.

Senior counsel for the respondent submitted that as a matter of competency a common law remedy could not be sought where a statutory one was available. The right of appeal under section 238 of the 1947 Act had been held to be effective in British Railways Board v Glasgow Corporation (1976). As for the petitioner’s point that the 2020 Act contained no mechanism for appeal, liability for rates was merely theoretical until the demand notice had been issued, and it was that which was capable of being appealed.

Wrong starting point

In his decision, Lord Braid said of the section 238 mechanism: “As the Lord Justice Clerk (Wheatley) said [in British Railways Board], in dealing with the argument above, that a review by a body which at one and the same time was party and judge could not properly be regarded as an appeal, ‘when Parliament has enacted that there is to be a right of appeal and designates the body which will hear that appeal, no matter who or what the body is, then it is a statutory appeal’.”

He added: “That leaves the question of whether there are exceptional circumstances such as to allow the petition to proceed notwithstanding the existence of an alternative remedy. Although the petitioner argued that this was a matter for the exercise of the court’s discretion, rather than a strict question of competency, ultimately it makes no difference, since on either approach the circumstances in which the court will allow the common law remedy to be pursued are the same. The circumstances in the present case fall some way short of that.”

Although not required to do so, Lord Braid then considered the lawfulness of the decision, saying: “The respondent was entitled to take [the advertised rent] into account as one piece of evidence which might found an inference as to the likely achievable rent. However, that was not the only evidence that the rent was significantly below what could reasonably be obtained, since another adminicle was the fact that the actual rent charge of only £1 was on any view only a nominal amount. It is likely to take little in the way of additional evidence to entitle a decision-maker to conclude that a nominal rent was significantly less than the rent which could have been achieved.”

He concluded: “The petitioner’s argument that had a higher rent been available, it would have leased the premises at that higher rent is no more than superficially attractive. As senior counsel for the respondent submitted, that argument proceeds on the premise that the arrangement was not an artificial one, which is the wrong starting point. Further, the petitioner’s argument comes perilously close to arguing that the only evidence of the rent which could reasonably have been obtained on the open market is evidence of rent actually achieved for the premises in question, which would deprive the test of any meaningful content.”

Having held that an alternative remedy was available to the petitioner, Lord Braid therefore sustained the respondent’s pleas-in-law and refused the petition.