Hyett v Wakefield Council

This is an appeal, brought by Mr Timothy Hyett, in connection with the findings of the Valuation Tribunal for England under which he was found liable for Council Tax of £136.34 in respect of a property at 9 Brighton Street in Wakefield. He was found liable, by the Tribunal, on the basis that he is the freeholder and that there were no other interests that qualified in advance of his interest. The issue turned exclusively on the question of whether the mortgagee, Paragon, was in possession of the property or whether there was simply a receivership under the Law and Property Act 1925. Mr Hyett accepts that the appointment of a receiver, as a matter of law, does not mean that a mortgagee has taken possession. He further accepts that if there is a valid receivership in this case, he is responsible for payment of the Council Tax.

The principal issue, which arises in this case, is whether Paragon, who were the mortgagees, are in fact in possession of 9 Brighton Street, Wakefield. There is no dispute that if they were in lawful possession of that address the liability for Council Tax for the period in question, would fall on Paragon, and not on Mr Hyett. Mr Hyett’s case, on this issue, is set out very fully in the documents before me, in the bundle, in his correspondence with both the council and with the Tribunal, and in a Skeleton Argument and supplements to that. The documents clearly and articulately set out his case, and are very helpful. I and, indeed, Mr Jones who appears for the council, have sympathy with the position in which Mr Hyett finds himself. The position is that he was in the business of “buy-to-let” and had a number of properties, many I think held in the name of a business, but four held in his individual name. At some stage in 2008, he found himself in a position, in the financial crunch at the time, where he was unable to meet his obligations, not on this property, but in respect of a mortgage on another property. Paragon, as it was plainly entitled to do under the terms of its loan, called in the entire loan, including the loan in respect of 9 Brighton Street. As I understand it, the loan portfolio involved very significant sums, of the order of millions of pounds.

Paragon then appointed receivers to manage the properties. Mr Hyett’s case is that the appointment of the receivers is a sham, and that in reality Paragon is in possession of the property. He relies on a number of matters. It would appear that, in the first instance, Paragon purported to appoint a company as receiver. Under the Law and Property Act 1925, a company cannot be a receiver and that appointment was, therefore, void. Attached to his first supplement to his Skeleton Argument are details of further information provided to him in the context of court proceedings between him and Paragon Mortgages Limited. He relies, in particular, on a response at page 63-64 of that document where he asked when the contract between Mr Hitches and Mr Shelton, on the one hand, and Redbrick Survey and Valuation Limited, on the other, was made. That is the contract by which the receivers purport to appoint Redbrick Survey and Valuation Limited as their agents for carrying out their duties under the receivership. The response is “2 June 2008”, that date being some six months before Mr Hitches and Mr Shelton were in fact appointed as receivers under the documents which we now have and which are in the court bundle. In the court bundle there is a letter of appointment to Mr Hitches and Mr Shelton dated 24 December 2008, and a further document of the same date signed by Mr Hitches and Mr Shelton, accepting that appointment. Mr Hyett submitted that this is all evidence that this was a sham, and that the documents should not be taken at face value. One of the difficulties with that is this. As I have already said, the attempt to appoint the company, Redbrick, as receivers was plainly void and of no effect. Therefore, the appointment, in due course, in December 2008 of Mr Hitches and Mr Shelton as receivers was, on the face of it, a valid appointment and would take effect as a matter of law.

There are, in the bundle, documents headed with the Redbrick logo but signed by Mr Hitches and Mr Shelton individually and, specifically, as receivers. That is undoubtedly sloppy paperwork, but sitting where I sit, it is not uncommon to see sloppy paperwork of that type. However, it does not in my view undermine the fact that those particular documents were plainly signed by those individuals in their capacity as receivers.

Mr Hyett also makes the point that Redbrick Survey and Valuation Limited is a wholly subsidiary of Paragon. Paragon appointed Messrs Shelton and Hitches as receivers. They then appointed Redbrick, as agents, to carry out their management functions under the receivership. Mr Hyett says that is for the sole purpose of enabling fees to be paid into Paragon, that the receivers had effectively, thereby, handed the property back to Paragon and Paragon is, therefore, in possession. The difficulty with all of that is this. As a matter of law, companies are separate corporate entities unless and until a court is persuaded to pierce the corporate veil and to find that they are not in fact separate entities.

I have enormous sympathy for the position Mr Hyett finds himself. Having appointed receivers in 2008, now, over nine years later, there are still receivers in possession and that is, of course, an unusual state of affairs. However, that does not make it in any way unlawful, nor could I possibly infer that it is a sham simply from that fact that the appointment of the receiver has lasted for over 9 years. Nor, it seems to me, could I properly infer that the appointment of associated companies is a sham. Businesses often use corporate structures and related companies to conduct their business and that is not, without more, unlawful. Mr Hyett complains that the arrangement here is clearly a vehicle to enable profit to be generated from the payment of fees, but again, on the face of it, there is nothing unlawful about creating a business model designed to maximise profit. Indeed, businesses are in business to make profit, and would be expected to wish to conduct themselves in a way to maximise their profit. Whilst there is that close relationship here, in my judgment, the council, having made enquiries, was bound to accept, as was the Valuation Tribunal, as am I, that the documents appointing Messrs Shelton and Hitches are valid documents of appointment, and that Messrs Shelton and Hitches were properly appointed as Law of Property Act receivers.

Mr Hitches has been replaced by Gillian Wood and I have already made clear what I think of her witness statement, dated 8 January, in which she states she has been a receiver since December 2008. No doubt, having spotted the complete nonsense in that document, further evidence has been provided from which it is clear that Gillian Wood was substituted in place of Mr Hitches in 2014. It is astonishing that Gillian Wood should have signed that document. She either did not read it, or she did not apply her mind to it, and it is an astonishing document from someone exercising the responsibilities of a receiver. It is not as though that date is buried deep in a several page document. This is a two paragraph witness statement and I have asked for an explanation as to the circumstances in which she has come to sign, what is patently, a false witness statement. Nevertheless, from the documents that are before me, I am satisfied that Messrs Hitches and Shelton were properly appointed, and that Gillian Wood was properly substituted in place of Mr Hitches in 2014.

In the course of his submissions, Mr Hyett told me that Mr Hitches had walked away because he is a decent chap and had realised, that in appointing Redbrick, the receivers had entered into a legally binding contract in breach of duty, in that it enabled Paragon to make profits over and above what was provided for by their debentures. He submitted that Paragon could have done the matter “above board” and in a proper way using, for example. GVA Grimley or some other, as he put it, “authentic receivership company”. Of course, they could have used a different company, but they do not have to, and the fact that they have used a closely related company cannot, without more, mean that this court could properly conclude that the appointment is in breach of duty or otherwise incorrect and/or invalid. Mr Hyett’s asserted that Wakefield Council, and/or the Valuation Tribunal, should have conducted a fair and proper enquiry to establish who the receiver is, and whether the receiver was properly appointed. He told me that if Wakefield Council explored this and told him that they were satisfied, on a fair examination of everything, that this was an authentic receivership, then he would hold his hands up and pay the appropriate sum. In essence, what he was hoping to achieve was that Wakefield Council, and/or the Tribunal, would explore the issues, no doubt with his assistance, but, in effect, on his behalf and on behalf of hundreds of others in the same situation, with a view to establishing what the position is. In particular, he hoped that they would establish that Paragon are in fact in possession of this and numerous other properties, such that Wakefield Council would be able to recover amounts, he told me, of more than £2 million in Council Tax liabilities in respect of other property holders who are in the same position as he is in relation to Paragon.

I fully understand why Mr Hyett feels so strongly about these matters, and I understand that he finds himself in enormous difficulty in trying to take on a company like Paragon. Ultimately, the issue as to whether or not these matters are a sham, is an issue between him and/or the other individual property holders and Paragon, and not between the council and Paragon. Mr Jones, on behalf of the council, submitted that even if Wakefield Council were to make those enquiries and were then to approach Paragon and say, ‘We, the council, think you, Paragon, are in possession’, Paragon has a complete answer to that. Paragon would be able to say, ‘Look at the Office Copy entries. Look at the appointment of the receivers. It is a valid document. You, the council, cannot challenge it. The only person who could challenge it would be, in this case, Mr Hyett. He has not done so. These are the documents, and that’s the end of the matter. We are not paying’. Whilst I am not necessarily satisfied that Wakefield Council could not in fact challenge that position, if they wanted to, I have no doubt at all it would not be an appropriate use of tax payers’ money to become involved in the sort of litigation that would entail even if, ultimately, there might as much as £2 million available to them. The cost of getting to that position would be prohibitive, and there is no certainty of outcome.

For all of those reasons, I have no hesitation in rejecting the appeal to the extent that it is brought on the basis that the Tribunal could, and should, have carried out an investigation as to who is the proper receiver. I have no doubt at all that the council had carried out sufficient enquiries and were bound to accept, at face value, the documents which they received showing that a receiver had been appointed under the Law and Property Act 1925. It follows from that, as Mr Hyett properly accepts, that the liability in all the circumstances for the Council Tax, when there is not a tenancy in place, falls upon him.

I turn then to the second issue which is when the tenancy expired in this case. Mr Hyett has made a number of very proper points as to when the tenancy expired. It appears that the tenant, a Miss Hinks, moved out of the property on 6 January 2016, and initially the council’s position was that was the date on which Mr Hyett’s liability accrued on the basis that the tenancy was surrendered on that date. Of course, a surrender requires a meeting of minds. A tenant handing in her keys cannot simply walk away and surrender the tenancy. It requires both parties to co-operate. It is unusual for a landlord to accept a surrender by the handing in of keys unless that landlord has another tenant ready in the wings and is pleased to find him/herself in a position to re-let the property immediately. On the whole, however, landlords require there to be proper notice so that they can check that the tenant’s obligations have been complied with and matters of that sort, and have time to arrange a re-letting.

There is no evidence at all on the issue of whether the landlord had accepted a surrender, and I would not have found that 6 January was the date on which this tenancy expired in the absence of clear evidence to that effect. Nor do I have any evidence, before me, as to what, if any, notice the tenant gave, whether in writing or otherwise. There is a witness statement from Ann Jones of the council, and she has produced evidence obtained from Whitegates Letting Agents, as to the date which their systems show as the end date of the tenancy. That email, which is dated 3 January, says this, ‘Start date is 19 June 2014 and the end date, on our system, shows 29 January 2016. The current tenant went in 2 April 2016’. The email goes on, ‘I can also see the deposit was released on 17 March 2016, indicating they did not move out earlier’. In the absence of an explanation as to why it would take six weeks to return a deposit, or whether that is the usual period, there is no evidence, at all, to support why 29 January is the end date on the system. For example, there is no evidence from Redbrick, for example, to say, ‘We do not have a copy of any notice but the reason we have entered that date on our systems is that that would be the date we would have taken from the tenant’s notice’, or anything of that sort. That is the sort of evidence which the courts regularly receive with a view to deciding an issue of that kind, if no written notice is available.

In his submissions, to the court, Mr Hyett has suggested that there is no evidence to suggest the tenant gave notice before 6 January and that is, undoubtedly, right. Of course, there is no evidence that she, in fact, gave formal notice, as in a written notice on 6 January, but Mr Hyett accepts, and rightly so, that there must by implication be a notice by her handing in the keys on that date and thereby giving 28 days’ notice. In those circumstances, and in the absence of any proper evidence to the contrary, I find, on the balance of probabilities that the tenancy ended on 3 February and thus Mr Hyett’s lability would commence on 4 February.

In terms of the amount of that liability, I am told by Mr Jones on behalf of the council that the figure which is in issue in this case, £136.34 is unaltered by that finding, because there is a 28-day period during which, if a property is both unoccupied and unfurnished, a liability is accruing, but it is a nil liability. Thus, for that 28-day period after Miss Hinks had moved out, on my findings, she, as the tenant, would remain liable, but because she had in fact vacated the premises which were unfurnished, her liability for that period was nil. By 4 February, when the liability starts to accrue again, on my findings, Mr Hyett is the man who is responsible for the Council Tax for that period, which I am advised remains the figure of £136.34.

I should deal with the point that Mr Hyett has also raised which is in relation to fire regulations. He has received a letter from the Wakefield council advising him that he needs to install smoke alarms and matters of that sort. He very fairly said that if receivership is valid, then he accepts that letter must be directed to him. However, he made the point that he has in fact had no access to this property since 2008, and has had no correspondence from the receiver. I do not doubt any of that for one moment, but that does not mean that he does not have the right of access. The receiver is there as his agent. The receiver also has duties as agent on behalf of the appointer, in this case Paragon, but the receivers’ actions in relation to the property are primarily as agent of Mr Hyett. Mr Hyett could insist on access being granted for the purpose of carrying out his obligations in terms of the fire matters. Of course, he would have to have access pursuant to the terms of any tenancy, but there will be a clause giving him a right of access for the purpose of carrying out works of that sort. He said that the council also owes duties to their tenants, which they undoubtedly do, and they have various powers of enforcement to ensure that works are carried out. However, as Mr Jones rightly pointed out, the council would not be able to get Paragon to do all those matters. While there are receivers in place, the receiver is there on behalf of Mr Hyett and the council’s powers of enforcement and entry to ensure that the works are carried out in the discharge of their duties owed to the council tenants, do not in any way render Paragon liable.

As I have already said, I have enormous sympathy with the position Mr Hyett find himself in. It is most unusual for a receivership to continue for a period of nine years. One would have expected there to come a point where the market might have been in a position where selling the property would have been sensible, but at the end of the day those are decisions for the receiver to make and not for this court.

Mr Jones also made the point that even if this court thought that Wakefield Council ought to make enquiries into the position, the court has no power to order Wakefield to do so. That is undoubtedly right. This court’s powers, in this appeal, are simply to deal with any issues of law arising which may have been incorrectly decided in the Valuation Tribunal, and then the court has the power to vary the decision, or to remit the matter back for a fresh decision.

The decision of law challenged in this case, is the conclusion that the receivers are in possession of the property, rather than Paragon. I find that decision was entirely right. I have adjusted the dates based on the evidence before this court, but overall the decision of the Tribunal was a correct one and therefore the appeal is dismissed, subject to varying the order in so far as it spells out a period for his liability. The order of the tribunal is varied so that the liability is from 4 February 2016, the tenancy having expired on 3 February 2016.