Isle Investments Ltd v Leeds City Council (Rev 1)

This is a case about a rates-avoidance arrangement in relation to office premises in Leeds. It features some snails in some crates. In legal terms, the case concerns the approach to identifying ‘sham leases’ in the context of avoiding non-domestic rates (“NDR”) in relation to unoccupied premises. In procedural terms, it is an appeal by way of case stated, arising from a determination of District Judge Holland (“the Judge”) at Leeds Magistrates’ Court. By that determination the Judge made a liability order for NDR against the appellant (“Isle”) in the contested sum of £105,728.70 in respect of Units 2, 4 and 7 (“the Units”) within Airedale House in Beeston, Leeds for relevant periods between 24 May 2018 and 31 March 2020. The Judge gave a judgment dated 3 April 2020 (“the Judgment”). Wishing to pursue an appeal to this Court, Isle asked the Judge to state a case, which she did by issuing a case stated document dated 30 June 2020 (“the Case Stated”) which said it contained “an expanded version of the less detailed summary of the conclusions and findings provided in the judgment”. The Case Stated identified the following question for this Court:

This is my encapsulation of the background to this case. Isle had acquired the Units. Its objective was to avoid its liability to pay NDR in respect of them. It made contact with a company called Crusader. They entered an arrangement whereby Isle agreed to pay Crusader 20% of the NDRs applicable to the Units, in return for Crusader implementing a scheme designed to achieve Isle’s NDR-avoidance objective. The upshot was a series of short (21-week) leases with Isle as stated ‘landlord’ and a series of NCSCs as the stated ‘tenant’ (or lessee). The Judge described eight leases as follows (giving date, unit and tenant): (1) 24.5.18 Unit 2 Property Alliance (9) Ltd; (2) 24.5.18 Unit 4 Property Alliance (9) Ltd; (3) 24.5.18 Unit 7 Property Alliance (9) Ltd; (4) 19.10.18 Unit 2 Property Alliance (10) Ltd; (5) 19.10.18 Unit 4 Property Alliance (10) Ltd; (6) 16.3.19 Unit 2 Property Alliance (12) Ltd; (7) 16.3.19 Unit 7 Property Alliance (12) Ltd; (8) 11.8.19 Unit 7 Property Alliance (14) Ltd. To these can be added two more – (9) 6.1.20 Unit 4 Property Alliance (18) Ltd; and (10) 6.1.20 Unit 7 Property Alliance (18) Ltd – on which no point of substance turns, so that references below to

The hearing of this appeal took place by a remote video hearing. Both Counsel were satisfied, as was I, that the mode of hearing involved no prejudice to the interests of their clients. The open justice principle was secured: the hearing and its start-time were published in the cause list, together with my clerk’s email address, usable by any person – whether associated with the parties, a member of the press, or a member of the public – wanting to observe the hearing. A remote hearing eliminated any risk to any person from having to travel to or be present in a court room during the pandemic. I am satisfied that the mode of hearing was appropriate, necessary and proportionate.

The parties drew to my attention a long line of authority relating to the concept of sham. In this judgment I will refer to cases by short-form names, accompanied by a full citation the first time they are mentioned. But first I will introduce the most noteworthy cases in date order, giving an indication of the subject-matter of each case. First, these cases in the period 1966 to 2011. (1) Snook was a decision of the Court of Appeal on 17.1.66 which decided that a refinancing arrangement relating to an MG car was not a sham: Snook v London and West Riding Investments Ltd [1967] 2 QB 786. (2) Miles v Bull was a decision of Megarry J on 30.8.68 which refused summary judgment against a wife, sought by a third party who had entered an arrangement to buy the matrimonial home from the husband: Miles v Bull [1969] 1 QB 258. (3) Aldrington was a decision of the Court of Appeal on 7.7.78 which decided that a ‘licence’ arrangement in relation to a flat in Highgate was what it purported to be and not a tenancy: Aldrington Garages Ltd v Fielder (1983) 37 P & CR 461. (4) Ramsay was a decision of the House of Lords on 12.3.81 which decided that two schemes had failed to achieve their tax-avoidance purpose. (5) Street v Mountford was a decision of the House of Lords on 2.5.85 which decided that a ‘licence’ arrangement in respect of rooms in Bournemouth had the effect of creating a tenancy: Street v Mountford [1985] 1 AC 809. (6) Antoniades was a decision of the House of Lords on 10.11.88 which decided that separate agreements in respect of the two occupiers of a top floor flat in Upper Norwood disguised the arrangement’s true character as a tenancy: Antoniades v Villiers (AG Securities v Vaughan) [1990] 1 AC 417. (7) Belvedere was a decision of the Court of Appeal on 24.10.95 which decided that the grant to an associated company of 56 leases in respect of a block of flats in Barnet were not a sham: Belvedere Court Ltd v Frogmore Developments Ltd [1997] QB 858. (8) Jones was a decision of Neuberger J on 22.6.00 that a tenancy and asset-sale to an off the shelf company, to protect a Welsh farming family’s home and assets from action by a mortgagee bank, were not a sham: National Westminster Bank Plc v Jones [2001] 1 BCLC 98 (a conclusion untouched by the judgment of the Court of Appeal on other issues [2001] EWCA Civ 1541 at §39); (9)

Then, these cases in the period 2012 to 2016. (12) Makro was a decision of HHJ Jarman QC on 28.6.12 which decided that the storage of pallets of documents in a Coventry warehouse for short periods ought to have been found to be rateable occupation, meaning the NDR-avoidance purpose of the overall arrangement had been achieved: R (Makro Properties Ltd) v Nuneaton & Bedworth Borough Council [2012] EWHC 2250 (Admin). (13) Kenya Aid was a decision of the Divisional Court on 22.1.13 which decided that the rateable occupation by a charity of premises in Sheffield was ‘wholly or mainly for charitable for purposes’ to trigger a statutory 80% NDR reduction: Sheffield City Council v Kenya Aid Programme [2013] EWHC 54 (Admin) [2014] QB 62. (14) PAG (2015) was a decision of Norris J on 9.8.15 which decided that an NDR-avoidance arrangement in relation to unoccupied premises, involving ‘leases’ to special purpose vehicle companies (SPVs) immediately placed into voluntary liquidation, to trigger statutory NDR-exemption (a) were not shams (b) but made it appropriate to make winding-up orders against the corporate scheme operator (i) not as contrary to the public interest but (ii) for abuse of the insolvency legislation:

Finally, these cases in the period 2017 to 2020. (16) Rossendale (2017) was a decision of HHJ Hodge QC on 30.11.17 which decided that local authority test case claims to recover NDR from the ‘landlords’ in the SPV-insolvency arrangements considered in PAG (2015) (a) should be struck out insofar as based on (i) sham and (ii) purposive statutory interpretation but (b) should go to trial insofar as based on ‘piercing the corporate veil’ (see Rossendale (CA)): Rossendale Borough Council v Hurstwood Properties (A) Ltd [2017] EWHC 3461 (Ch) [2018] RA 251. (17) Anami was a decision of the Divisional Court on 19.6.18 which decided that the production after the event of a ‘strange lease document’ involving a tenuous and dormant ‘tenant’ in relation to a unit in West Bromwich was a sham and the ‘landlord’ remained liable for

As HHJ Jarman QC put it in Makro at §56: “It has been recognised for a considerable amount of time that ratepayers or potential ratepayers can and do organise their affairs so as to avoid paying rates”. As Henderson LJ explained in Rossendale (CA) at §74: if the “intrinsically legal” concept of EEO has validly been conferred, “the tax avoidance motivation of the parties” becomes “irrelevant”. An arrangement with an Effective-Avoidance Intent (§1 above) may or may not be sham. The Upper Norwood

A sham is an arrangement involving an intentional mismatch between the ANR

As Diplock LJ put it in Snook at 802E: “for acts or documents to be a ‘sham’ … all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating”. The same point was made by Arden LJ in Hitch at §§69, 85; and HHJ Hodge QC in Rossendale (2017) at §§51, 53. It can suffice if one party is recklessly indifferent: A v A at §§50, 52. The mismatch creating the false impression of the TNR is a “pretence” and a “disguise” (Lord Templeman in Antoniades at 462H and 463F-G). That being so, it is well-established that “a sham transaction involves a degree of dishonesty” (Jones at §39), at least “ordinarily” (Butcher J in Camelot at §§19(6), 32). This element has been expressed as the “dishonest common intention that the transaction is not going to create the legal rights and obligations which it gives the appearance of creating” (Rossendale (2017) at §§60(5), 61, 67).

As Arden LJ explained in Hitch at §64: “An enquiry as to whether an act or document is a sham requires careful analysis of the facts”. As Mostyn J has explained in Broxfield at §29: “Whether an impugned arrangement is or is not a sham is … a matter of fact”, with which factual evaluation the court will interfere on an appeal by case stated only if “there was no evidence to support a challenged finding of fact, or … the … judge’s finding was one that no reasonable judge could have reached”. In order to see whether there is a mismatch between them, it will be necessary to analyse the ANR and the TNR. The court will need to identify “the true bargain between the parties”

As Arden LJ explained: “in the case of a document, the court is not restricted to examining the four corners of the document. It may examine external evidence. This will include the parties’ explanations and circumstantial evidence, such as evidence of the subsequent conduct of the parties” (Hitch at §65). This enquiry (“External Evidence Enquiry”) is “perfectly proper” (Jones at §42). So, “the court must pay attention to the facts and surrounding circumstances and to what people do as well as what people say” (Lord Templeman in Antoniades at 464A); and “it is permissible to have regard not only to matters predating the conclusion of the agreement but also to how the arrangements were operated in practice afterwards” (Camelot at §19(5)). It can be relevant to have in mind that conduct consistent with the ANR “could have been undertaken in order to make a sham transaction look more convincing” (Jones at §58). The factual enquiry can include questions of practical reality: in Antoniades Lord Templeman explained (at 463E) that “[t]he facilities in the flat were not suitable for sharing between strangers”, a point also recorded by Lord Oliver (at 469C-D) by reference to “the physical lay-out and size of the premises”.

The fact that a contract such as a lease is “an artificial device intended to circumvent a result the Act would otherwise have brought about” does not mean it is a sham, and such artificiality does not “entitle the court to ignore or override apparently effective transactions which on their face confer an interest in land”, where there is “no element of pretence” and the “parties were not doing one thing and saying another” (Sir Thomas Bingham MR in Belvedere at 876D-F). As Lord Templeman said in

Effective-Avoidance Intent does not connote unlawfulness/sham (see §7 above) but nor is it inconsistent with sham. That is because there are, in the context of whether an arrangement is a sham, two distinct types of Effective-Avoidance Intent. One type involves intended effectiveness through the document being genuine and reflecting the TNR. That is the species present in “most honest tax avoidance schemes” where “the intention of the parties was to enter into transactions which are valid and have their purported effect” (Henderson LJ in Rossendale (CA) at §78). This species engages the “strong presumption that parties to a transaction intend its terms, both as to rights and obligations, to be effective” (Butcher J in Camelot at §38). The other type involves intended effectiveness through the document being successful in giving a false impression as to the TNR. This alternative type is why an Effective Avoidance-Intent does not of itself disprove the existence of a sham. In Jones, Counsel argued that the parties “must have intended [the agreements] to be genuine” because “only if the agreements were genuine do they achieve … the result … intended” (at §44). The flaw in that argument, identified by Neuberger J (at §45) is that: “If it were right, then no arrangement could ever be held to be a sham” for “the whole point of a sham provision or agreement is that the parties intend to give the impression that they are agreeing that which is stated in the provision or agreement”. So, the landlord in Antoniades had an Effective-Avoidance Intent – to avoid the Rent Acts – but the ‘tenancy’ was a sham.

In Jones, Neuberger J said this: “The whole point of a sham provision or agreement is that the parties intend to give the impression that they are agreeing that which is stated in the provision or agreement while in fact they have no intention of honouring their respective obligations or enjoying their respective rights under the provision or agreement" (Jones at §45). He went on to speak of a presumption, in the case of “what appear to be perfectly proper agreements on their face”, that the parties “intend to honour and enjoy their respective obligations and rights” (at §46). This formulation (‘no intention of honouring obligations or enjoying rights’) (“the Neuberger Formulation”) featured in Rossendale (2017) at §49. It was applied in Camelot, where Butcher J described it as the “justification” for the External Evidence Enquiry (see §11 above) since “such conduct may give rise to the inference that, at the time it was entered into, the agreement was a pretence” (at §19(5)), later describing the Neuberger Formulation as “what is involved in this investigation” (at §31).

As Lord Templeman said in Street v Mountford at 825H: the court should be “astute to detect and frustrate sham devices”. However, as Neuberger J said in Jones at §46,

“there is a strong presumption, even in the case of an artificial transaction, that the parties to what appear to be perfectly proper agreements on their face intend them to be effective, and that they intend to honour and enjoy their respective obligations and rights”. Having made both Lord Templeman’s point and Neuberger J’s point (at §§3031), Butcher J went on to explain in Camelot (at §32) that since “an allegation of sham carries with it a degree of dishonesty”, “the court will carefully consider whether [dishonesty] is made out, the onus being on the party which is alleging that an agreement or provision is a sham or pretence to make that out”. It has therefore been said that: “[t]he court is slow to find that an agreement is a sham” (Rossendale (2015) at §§60(6) and 61); and “[m]ere circumstances of suspicion do not by themselves establish a transaction as a sham” (Miles v Bull at 264D-E). Ultimately, however, the question is whether “the evidence satisfies the court that it is more likely than not that the arrangement was a sham” (Mostyn J in Broxfield at §24) and, so far as dishonesty is concerned, the “court has to consider on the admissible evidence whether the charge is more likely than not made out” (at §25).

Before analysing the position in relation to unoccupied premises, it is worth starting with occupied premises. As David Richards LJ explained in Rossendale (CA) at §4: “In the case of occupied premises, NDR are payable by the person in occupation of the relevant property on the day in question”. This is the effect of the Local Government

As David Richards LJ went on to explain in Rossendale (CA) at §§8 and 11,

“[d]ifferent provision is necessarily made for NDR on unoccupied premises” pursuant to ss.45 and 65(1) of the 1988 Act, by reason of which: “NDR are payable in respect of a property if … on the day in question, the entirety of the property is unoccupied”; and “the person liable for the NDR must be ‘the owner’ of the whole of the property” meaning “the person entitled to possession of it” where “entitlement to possession connotes the exclusive entitlement to occupy the property”. So, in ‘unoccupied premises’ cases a key question may be: who has the EEO? That is not the same as asking: who is in AO? It cannot be. When determining NDR liability in an ‘unoccupied premises’ case, nobody is in AO. The focus is thus “inevitably … on the legal right to possession, because the property is by definition unoccupied” (Henderson LJ in Rossendale (CA) at §71).

In a case concerning ‘unoccupied premises’ and NDR liability, where a lease purports to confer an EEO on a tenant, the question can arise as to whether the lease is a sham.

So far as concerns ‘pretence’ and the degree of dishonesty (see §9 above), Norris J explained in PAG (2015) at §41 that: “No landlord was a party to the present proceedings. To find each scheme user to be dishonest on the evidence of [the corporate scheme operator]’s witnesses alone would be a strong thing. The quality of the evidence does not justify that finding”. On that same issue, HHJ Hodge QC in Rossendale (2017) agreed with the submission (at §§63, 67) that: “Crucially … the particulars of claim do not allege that the [‘landlords’] and the relevant SPV entered into the scheme leases with a dishonest common intention of deceiving third parties”; and “There is nothing in the material in the particulars of claim that gives rise to any reasonable grounds” for finding “a dishonest common intention, that the transaction should not in fact create the legal rights and obligations which it gives the appearance of creating”.

There is another point. A ‘sham lease’ will intend to give a false impression to third parties or a court as to the conferral of EEO, so that the ‘tenant’ is treated as liable for NDR. The ‘genuine lease’ will intend to confer EEO on the ‘tenant’ so that the ‘tenant’ is treated as liable for NDR. Thus, an Effective-Avoidance Intent whereby the ‘tenant’ is treated as liable for NDR does not, of itself, demonstrate (i) sham lease or (ii) genuine lease. This underlines that the true vice for a sham lease will be as to the TNR/ANR and the EEO: it will not be the primary liability, but the primary right, which will be the focus.

For all these reasons, what will ultimately matter is whether the purportedly conferred EEO is a ‘pretence’. The question is not: is the true intention of the parties that the ‘tenant’ will not go into AO? The question is, rather: is the true intention of the parties that, during the ‘term’ of the ‘lease’: (a) the ‘tenant’ could not go into AO (or place a third party into AO) and/or (b) the ‘landlord’ could go into AO (or place a third party into AO). Only if (a) or (b) is true is there a mismatch between the TNR and the purported conferral of the EEO on the ‘tenant’. Hence the significance of this passage in PAG (2015) at §20:

In my judgment, there is this further way – in the context of unoccupied premises and NDR – neatly to test whether the lease’s purported conferral of an EEO on the ‘tenant’ constitutes the TNR. One can ask this question: if the ‘tenant’ did go into AO (or place a third party into AO) would that breach the agreement constituting the TNR? If so, that supports a conclusion that there is a mismatch, and (if there is an Effective-Avoidance Intent) a ‘pretence’. Seen in this way, the Neuberger Formulation (see §14 above) has an important role to play. Evidence that the parties have “no intention” of the ‘tenant’ “enjoying the … right[]” (EEO) may, together with the other evidence in the case, support a conclusion that the tenant could not, consistently with the TNR, ever go into AO and if they did that would be a breach of the true agreement between the parties.

So far as relevant to issues such as winding up, piercing the corporate veil and purposive statutory interpretation, public policy implications of the leases in PAG (2015) and Rossendale (2017) have had a ventilation in the Court of Appeal: in Rossendale (CA) and PAG (2020). HHJ Stephen Davies recorded in PAG (2019) at §21 that there had been proposals in Scotland and Wales to introduce new legislation to regulate artificial NDR-avoidance arrangements. As HHJ Hodge QC explained in

The Case Stated records (at §33) that the Judge had in mind the statutory provisions applicable in a case of unoccupied premises (§17 above): the 1988 Act ss.45 and 65. The parties’ skeleton arguments before the Judge had made clear that the case was being approached on both sides on the basis that these were, at the material times, unoccupied premises. The Judge’s identification of legal principles by reference to the authorities was to be found in the Judgment at §§11, 64-66 and 79. Those passages read as follows:

Isle issued an application to amend the Case Stated. Ultimately, what Isle asked this Court to do was to amend the Case Stated, without sending it back to the magistrates’ court, so as to disregard the text underlined in the following passages:

The essence of Isle’s case for disregarding the underlined text, as I saw it, came to this. (1) Parliament has given this Court an important power to amend a Case Stated (Senior Courts Act 1981 s.28A; CPR 52PDE §3.9) including by excluding content from the case stated document. The appropriate exercise of that power is illustrated by a Westlaw synopsis [2017] 2 WLUK 220 of a decision of Andrew Baker J (9.2.17) in JL, an appeal whose substantive judgment is JL v Gloucestershire Magistrates’ Court [2017] EWHC 2841 (Admin). In JL the case stated document was revised (there, by remittal: substantive judgment §§2-3), Andrew Baker J having concluded that text belatedly introduced was a “material shift” in the basis for the magistrates’ decision to convict the appellant, falling outside the magistrates’ “leeway … to amplify their reasons” and not constituting a “fair and accurate record”. (2) This Court should adopt the same approach in cases where a public authority seeks to introduce supplementary reasons in defending judicial review proceedings, exemplified by Ermakov (R v Westminster City Council, ex p Ermakov [1996] 2 All ER 302 at 315h316c): recognising the difference between “elucidation” and “fundamental alteration”, between “confirmation” and “contradiction”; where there is “no warrant for receiving” reasons “wholly different from the stated reasons”; and where there are

“good policy reasons” not to permit “wholesale amendment or reversal of the stated reasons”. (3) Applying the approach in JL and in Ermakov the text here constitutes: an unfair, material shift, beyond the Judge’s appropriate leeway; a fundamental alteration; a wholesale amendment. This is a material divergence: the Judge has introduced entirely new reasons (and posed an inappropriate question). The Judge introduced reasons whose prejudicial effect, after the event, is to make the decision “harder to overturn” on appeal. The Judge knew that Isle wished to appeal the Judgment, on the ground that her conclusion on sham was reached without asking the right question: whether there was a common intent that no EEO would be conferred on the tenants. There was “absolutely nothing” in the Judgment dealing with this (except, by “luck”, in the Judge’s encapsulation of the Council’s position) and her new reasons unfairly “seek to cover off the points raised” in Isle’s draft grounds of appeal.

A procedural question arose out of the application. It was common ground that it should be dealt with by me as the Judge due to hear the substantive appeal. Isle’s position was that acceding to the application would mean disregarding the text rather than remitting to the magistrates (as in JL). It asked me to agree to hear argument on the point at a 2hour hearing scheduled 2 days before the dated fixed for the substantive appeal hearing. I acceded to that invitation. In the event, Mr Mackenzie used nearly all of the 2 hours so that the application was part heard. I decided to continue with the argument at the start of the substantive hearing, which itself went part-heard. I declined the invitation to rule on the application as a preliminary issue, with reasons to follow in the substantive judgment, as they now do. In my judgment, the better course – one which involved no unfairness to either party – was to consider the arguments relating to the application alongside the substantive arguments on the appeal, as an integrated whole. In judicial review cases (like Ermakov itself) whether supplementary reasons are to be relied on or excluded is dealt with alongside the substantive arguments. The parties were well able to make their submissions on the substantive appeal, making clear their positions if the disputed text were included or excluded, as they did. The case had been prepared on that basis and a composite skeleton argument had been filed by Isle dealing with all issues. The substantive hearing was imminent. There were, in my judgment, real advantages in being able to see the question of amendment of the Case Stated alongside the substantive arguments, and consideration of the relevant authorities, in the round.

In my judgment, this is not a case in which it is appropriate for this Court to exercise the power to amend the Case Stated and exclude the text to which Isle objects. The application fails. My reasons start with the position in principle. (1) JL was a criminal conviction where text introduced into the final version of the case stated document was inconsistent with (i) the reasons expressed in the judgment (ii) the record of the proceedings and (iii) the original case stated document provided by the magistrates. (2) In judicial review, if the public authority defendant wishes to give further consideration to some matter, the appropriate course in general will be to withdraw the impugned decision and issue a fresh decision. (3) The special structure of the statutory scheme for appeals by case stated recognises that the court whose decision is under appeal has a second function – acting with the judicial integrity of a court – namely the writing of the case stated document. (4) It is commonplace in an appeal by case stated that the court hearing with the appeal will have, as in this case, two detailed documentary sources: the judgment and the case stated: see eg. Makro at §30; Kenya Aid at §5; Autoclenz at §§10, 12; and Consolidated Goldfields (Consolidated Goldfields Plc v Inland Revenue Commissioners [1990] 2 All ER 398) at 403b and 404g. (5) Internal inconsistency or incoherence can be a basis for allowing an appeal, just as it would be where an internal inconsistency or incoherence arises on the face of a single determination or judgment. (6) The case stated document may address matters not found in the judgment. It may also set out the evidence on which findings are based: cf. R (Friedman) v Snaresbrook Crown Court [2019] EWHC 2209 (Admin) at §13. It may express further or more detailed findings of fact. (7) It is well-established that an aggrieved party may “obtain more detailed reasons” through a request to state a case, in response to which magistrates may give “reasons at somewhat greater length”: McKerry v Teesdale and Wear Valley Justices per Lord Bingham CJ at §23. That principle was applied in R (McGowan) v Brent Justice [2001] EWHC 814 (Admin) [2002] HLR 55 at §§13, 29 (where Ermakov was considered as to the function of reasons: see §18) and in Marshall (Marshall v Crown Prosecution Service [2015] EWHC 2333 (Admin) at §§26-27). (8) Marshall is a good example. There, the case stated document contained “amplified reasons” (§16) which were challenged as relating to matters which “formed no part of the findings or reasons for the decision” (§21) previously given (§15). The court held that the reasons were within the “fair and reasonable limits” of proper amplified reasons (§27) and rejected the contention that they were an “ex post facto rationalisation of a decision reached at the time on a materially different basis” (§20). The amplified reasons showed that the magistrates had directed their minds (§30) to a central issue on which reasons were said to be missing from their original decision. Marshall is a paradigm example where the further reasoning ‘made it harder’ for the appeal by case stated to succeed. (9) A case stated document – produced by the court acting with the judicial integrity of a court – may be the product of further thinking about an issue. On an appeal by case stated, where the appellant submits that the court below failed to deal with an issue raised before it, the matter can be remitted to the same court to deal with that issue by setting out its position in the case stated document. That happened in Broxfield, where Mostyn J

“required the case [stated document] to be … amended to deal with an argument advanced at trial … but on which the court had not ruled” (at §1). Another example is Consolidated Goldfields where (at 400g) the court considered the power to send the case back for amendment and (at 402g) described the circumstances in which the appeal by case stated can be “remitted for additional findings to be made or to be considered”, which course is appropriate where the case stated document is already “full and fair” (§402g). In the light of this, there can be no good reason why the court whose decision is under appeal should not think about an issue with which it is being told it failed to deal, and deal with it (as in Marshall), to make sure the case stated document is “full and fair” when it arrives at the appeal court. There are policy reasons why the court stating the case should be able to do what the appeal court is able to require of it. (10) Any court whose decision is the subject of a proposed appeal, and has the opportunity to state a case, will need to act with clarity and integrity. But where a point was fully argued before that court, and where it is being said that the court has not dealt or dealt adequately with the point, it is not inappropriate for the court to set out its genuinely-held views on the point, whatever they are.

My reasons continue by turning to the present case. (11) Here, there is no conflict or inconsistency with reasons given in the Judgment and the amplified reasons given in the first draft of the case stated document, including the text about which complaint is made. Indeed, the Judge was plainly, and contemporaneously, alive to the issue to which Isle refers. She recorded in the Judgment that the Council’s “case is that despite the appearance of the leases, there was never an intention to create leases where exclusive possession was given to the third party occupiers”. That was not “luck”, but judgment: a deliberate, material part of the Judgment. The Judge also recorded as the governing legal principle (Judgment §64, citing Snook at 802) that a sham was a document “intended … to give third parties or the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intended to create”. So, as in Marshall (at §30), the Judge was demonstrably well aware of the question in issue and the impugned reasons are relevant to the question – on the substantive appeal – which concern whether and how she directed her mind to its application. The question whether the TNR involved the conferral of an entitlement to exclusive possession was reflected in both these passages. Whether the Judge made a sufficient and sustainable finding as to the TNR and non-conferral of an EEO are among the substantive grounds of appeal, and I will turn to them in due course. (12) In response to the Judgment, Isle submitted Grounds of Appeal which submitted: “At no point in the judgment does the Judge address the question of whether the right to possession created by the leases was intended to be genuine, or whether it was intended to be a pretence or sham”. Isle invited the Judge to pose this question in a case stated document: “Was I entitled to find that the leases were shams without having found (a) that the parties to the leases did not mutually intend the leases to confer on the lessees an entitlement to occupy the Units or (b) that the parties to the leases were dishonest in relation to the clauses in the leases conferring the entitlement to occupy the Units on the lessees?” The Judge issued a draft Case Stated containing much expansion (including many points on which Isle relies), included the text about which complaint is made, and declined to adopt the question as formulated by Isle (with its built-in premise). (13) The text to which objection is raised did not, in my judgment, involve: unfairness; “fundamental alteration”; “contradiction”; reasons “wholly different”; “wholesale amendment”; “reversal”; or “material shift”; or an “ex post facto rationalisation of a decision reached at the time on a materially different basis”. There is no reason to conclude that there is any, or any apparent, failure to act with integrity. The Judge has articulated her fuller reasoning, giving her thinking what she considers to be the appropriate clarity, transparency and comprehensiveness. It is inappropriate to ‘carve out’ the text about which Isle complains; and unnecessary to remit the Case Stated to the Judge. If the reasoning is flawed or inadequate or insupportable, Isle will succeed in its substantive appeal.

It is appropriate to deal next with a question which arose as to how one passage in the

The Judge described the parties’ positions in the following two sections in particular. In the Judgment at §§10-12:

The [Council] accepted that although it is lawful to create leases for the purpose of shifting liability for payment of rates, in this case, the arrangements entered into by [Isle] were not lawful arrangements for rate mitigation, but were solely a method of rates avoidance.

The [Council] submitted that the leases were shams, executed solely for the purpose of shifting business rates and the lessees had no meaningful occupation of the units. As these purported leases were a sham, they were not genuine leases and did not transfer liability for the unpaid rates away from [Isle]. The [Council] therefore submitted the [Isle] was the correct rate payer.

[Isle] accepted that within the units there had been an unconvincing attempt to make it appear there was snail farming in progress. [Isle] argued this behaviour did not affect the validity of the leases, which had to be considered as a whole.

[Isle] submitted that the leases were genuine, their purpose was to implement a rate mitigation scheme and to transfer its liability for rates as owner to the tenant. In order to successfully achieve this outcome the leases had to create an entitlement to occupy the Units, which [Isle] asserted they did. It was accepted by [Isle] that the leases were not commercial leases and were artificial in the sense that they were part of a rate mitigation scheme rather than purely commercial leases.

[Isle] submitted there was no evidence of dishonesty or pretence in relation to the leases themselves, which granted the right of occupation to the lessees

It is unnecessary and inappropriate to set out the entirety of the Judge’s reasoning. What follows is my encapsulation – derived from the Judgment and the Case Stated as I read them – of the Judge’s analysis of the facts and evidence, on which she based her ultimate conclusion that the leases were ‘shams’. All quotations are the Judge’s words.

Isle owned the Units. They were offices in an office complex. They were empty and it was anticipated that they would remain empty in the medium term. Facing a significant liability to pay NDR in respect of empty properties, Isle approached Crusader, a firm specialising in empty property rate mitigation. Isle “paid 20% of [the] projected rate liability to create a scheme to avoid these rates”. Crusader identified NCSCs (newly created shelf companies) – Property Alliance (9) Ltd, Property Alliance (10) Ltd, Property Alliance (12) Ltd and Property Alliance (14) Ltd – to be the tenants under the sequence of eight leases (to which, I interpose, can be added two leases involving Property Alliance (18) Ltd: see §2 above). Each was a short 21-week lease using a document prepared by Crusader’s legal team. The rent was £1, which “must have been far below the true market value”. Under the terms of the leases, each NCSC agreed to pay “all business rate liability” in respect of the Unit. The leases were terminable on 7 days notice. The NCSCs were “successor shelf company[ies] operated by the same Director” whereby a Mr Ball “the identical Director made [each] new lease agreement for the same units using a different company name”. Leases (1) to (5) – with Property Alliance (9) Ltd and Property Alliance (10) Ltd – contained, as well as a provision conferring EEO, the Snail Farming Restriction (§30 above). In later leases (6) to (8) – for Property Alliance (12) Ltd and Property Alliance (14) Ltd the Snail Farming

Restriction was replaced with a permitted use provision restricting permitted use to

“the purpose of property management/marketing and use by persons authorized by the Tenant”. All eight leases “on the face of it … were capable of being valid leases”. But the “sole purpose of these leases” was “to enable [Isle] to deny liability for the business rates, and to generate a fee for the avoidance of that liability payable by [Isle] to Crusader”; “to defeat any demand by the Council for business rates for the premises”; “for [Isle] to seek to avoid the liability to pay business rates in circumstances where the tenant had no intention of paying the business rates”.

The use of a sequence of NCSCs meant that: “If any [NDR were] demanded from the

In relation to all eight leases: “There was never any prospect of the tenant paying the business rates” and “the tenant had no intention of honouring the primary obligation under the lease, to pay the business rate liability”. “There was no income being derived from the units” and “it would not have been commercially possible for the rates to have been paid”. The “lessees appeared to have no means of generating any income from which to pay the business rates when demanded”.

“There was no caretaker or owner presence on site in relation to any of the units during the periods of the leases.” Under the scheme “the units would remain empty”. The “lessees had entered into these agreements having no intention of genuinely occupying the Units”. Ms Linsell’s observation from her first visit (17.7.18) was that there was “an element of occupation”. There was “no evidence of any occupation” after March 2019 (when leases (7) and (8) were dated) and on the third visit (20.6.19) Units 4 and 7 were “locked and apparently unoccupied”. The “element of occupation” observed by Ms Linsell was the presence of 50 crates in Unit 4 (at 17.7.18 and 15.1.19), 40 crates in Unit 7 (at 17.7.18) and 10 crates in Unit 2 (at 20.6.19). The crates for delivery to Unit 2 had previously been observed left “in the communal area on the ground floor”. Crates opened (17.7.18) were found to contain “a single snail with a covering of straw”; another “two snails, a small tub of soil, a small tub of bark and a small tub of dried grass” but “no evidence of water”; another “similar” contents. “There was no water in the boxes.” When the water supply to the Unit was checked (15.1.19) it was found to have been “turned off” (and there was no demand received for the water to be turned on). This “was not a snail farm”. There was “no snail farm … in

For Ms Linsell’s scheduled visit on 17.7.18 she was met and let into Units 4 and 7 by a keyholder called Gordon. For her scheduled visit on 15.1.19 she was met and let into Units 2 and 4 by a keyholder called Melvyn. Gordon “did not seem to know who he was representing” and “said he had simply been asked to get the keys and open the units”. Melvyn’s behaviour was “the same”. “Despite being asked, neither keyholder gave information about … who they were representing, beyond saying they had picked up the keys on instructions”. Mr Ainsworth-Jackson was aware that Mr Dee (a fellow

There were periods after leases (1) to (3) were signed in May 2018 when “refurbishment works” had taken place at Units 4 and 7 and “during the periods when

Whereas a “genuine lease would have created an exclusive right of occupation”, the Snail Farming Restriction meant leases (1) to (5) “allowed no legitimate business to take place”. That was because the Units were “offices” and “a snail farm did not and could not” – in the sense of practical impossibility – “have operated there”. Although the Snail Farming Restriction was not repeated in leases (6) to (8), it was “of some evidential value when considering the purpose of all the leases”.

Jonathan Ainsworth-Jackson, the Director of Isle who gave written and oral evidence at the hearing before the Judge and was cross-examined, was a person “closely involved in every aspect of the day to day running of his many business ventures”. He knew “the way in which the proposed scheme would operate”. He “knew the units would remain empty”. He “knew there would never be a snail farm” in the Units. In his evidence “he attempted to maintain the fiction that there was a snail farm in the units”, but that was

“not being honest with the Court”. He “knew [the] Units would not be used by the purported tenants and there would be no exclusive possession”. He had not “believed there would be any meaningful occupation of the property”. He knew “why the identical Director made [each] new lease agreement for the same units using a different company name” and was “not being honest with the Court” when in his evidence “he said he did not know” this. He also “knew the various guises of Property Alliance would never pay the rates owed” and “at the very least he deliberately and wilfully turned a blind eye to this”.

Mr Ainsworth-Jackson “made no enquiries or investigations, of any sort, into the tenants or sub-tenants purporting to use the units” and “made no enquiries to see if the buildings were used at all” or whether “the permitted use clauses were lawful under planning or health or safety law” and “no enquiries to confirm any of the clauses in the leases were being complied with”. He “never made any enquiries into what was happening within the units during the periods of the leases”. He “made no visits to the premises and did not arrange for any to take place”. He “did not feel the need to make any of the usual checks the owner of a building would make in relation to the use to be made of the offices”. That was because he “knew there would never be a snail farm in his offices”. He “had not contact with any purported users of the properties”. Despite being “a professional landlord”, he “made no attempts during the period of the leases to ascertain that any sub-tenants were solvent or were using [the] premises lawfully”.

Bearing in mind “the caution set out” by Neuberger J in Jones, “that the Courts are slow to find a sham” and “there is a presumption of regularity”, nevertheless “there was dishonesty in this case”. The “actions” of the directors of the NCSCs were “dishonest”. Mr Ainsworth-Jackson was “dishonest”, and was “at the very least recklessly going along with the sham and therefore had the necessary intent, which was a common intent”. He “entered into these agreements, knowing … that they had the appearance of genuine leases, but … [that] they were not genuine”.

The Judge had to conduct the factual enquiry (see §10 above). She had the advantage of oral evidence with cross-examination. My role is that of an appellate court. As CPR PD52E §1.1 explains: “An appeal by case stated is an appeal to a superior court on the basis of a set of facts specified by the inferior court for the superior court to make a decision on the application of the law to those facts”. Isle is questioning the Judge’s determination “on the ground that is wrong in law” having asked her “to state an opinion for the High Court on the question of law” (Magistrates’ Courts Act 1980 s.111(1)). The function of the High Court is to “hear and determine the question arising on the case” and ultimately to decide whether to “reverse, affirm or amend the determination in respect of which the case has been stated” or “remit the matter to the magistrates’ court … with the opinion of the High Court” making “such other order in relation to the matter … as it thinks fit” (Senior Courts Act 1981 s.28A(3)). The High Court’s decision is final (s.28A(4); Kenya Aid §46). As Mostyn J explained in Broxfield at §29 (“the constraints on appeals against findings of fact” require “a conclusion either that there was no evidence to support a challenged finding of fact, or that the trial judge’s finding was one that no reasonable judge could have reached” (and see Hitch at §3). As Coulson LJ put it in Kalma v African Minerals Ltd [2020] EWCA Civ 144 at §48: “unless a critical finding of fact has no basis in the evidence, or is based on a demonstrable misunderstanding of relevant evidence, or a failure to consider such evidence, an appellate court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified… This applies equally to findings of primary fact and any inferences to be drawn from them”). CPR PD52E §3.9 provides that the appeal court “may draw inferences of fact from the facts stated in the case”. As Geoffrey Lane LJ explained in Aldrington (at 472): “the proper inferences which are to be drawn from [the primary] facts … are … matters in which [the appeal] court is entitled – and, if it thinks proper, is bound – to differ from the [court below]”. As Sedley J explained in Balchin (R v Parliamentary Commissioner for Administration, ex p Balchin [1996] EWHC 152

It makes sense to start with this ground of appeal, which Isle formulated as follows: “The Judge erred in treating the artificial elements of the leases and the rates avoidance schemes as being sufficient to justify a conclusion that the leases were shams. In so doing the Judge erroneously regarded artificial arrangements analogous to sham arrangements and failed to consider whether the arrangements were effective, despite being highly artificial, because the parties intended those artifices to be effective”. The essence of Isle’s argument in its support of this ground of appeal, as I

I do not accept that the Judge treated artificiality as sufficient to find sham. That would have been surprising, not least since the Council’s skeleton argument before her submitted: “The companies concerned are not only artificial and created solely for the permitted purpose of avoiding rates, but in the circumstances described the transactions are shams in the legal sense”. The Judge set out in the Judgment (§24 above: Judgment §§64-66) the “legal principles of a sham”, describing (Judgment §65) the “test for a sham” as being “set out” in Hitch, quoting §67 of Arden LJ’s judgment in that case: “the fact that the act or document is uncommercial, or even artificial does not mean that it is a sham. A distinction is to be drawn between the situation where the parties make an agreement which is unfavourable to one of them, or artificial, and a situation where they intend some other arrangement to bind them”. The Judge also cited Jones as relevant to “the evidence of sham” (§24 above: Judgment §66) including

This ground of appeal was formulated by Isle as follows: “The Judge erred in concluding that (a) the SPVs’ intention not to carry out any meaningful business activity in the Units and (b) the fact that no meaningful business activity ever did take place in the Units meant that the leases themselves were shams. In imposing the ‘meaningful business’ test the judge placed an impermissible gloss on the ownership condition in s.45(1)(b) of the 1988 Act and/or the meaning of ‘owner’ in s.65(1) … and/or applied an impermissibly high threshold for the intention a party to an arrangement must have before the arrangement can be regarded as valid rather than a sham”. The essence of Isle’s argument in support of this ground of appeal, as I see it, comes to this. In the context of NDR and sham leases – especially in relation to unoccupied premises – it is important not to fall into the trap of looking for ‘meaningful business’ or a ‘paradigm lease’. The focus must be on the EEO not on AO (see §§17-18 above) for the reason given by Henderson LJ in Rossendale (CA) at §71: “the property is by definition unoccupied”. The Judge recorded the Council’s case as including reliance on the fact that “the lessees had no meaningful occupation of the units” (§31 above: Case Stated §29). She emphasised that “there was no meaningful business taking place in the offices at any time” (§36 above) and she found that Mr AinsworthJackson had not “believed there would be any meaningful occupation of the property” (§40 above). In relation to whether the NCSCs would pay the rates, the Judge emphasised the lack of “income being derived from the units”, that the tenants did not “generate any income”, with “no evidence of any income being capable of being generated under the leases” and “no means of generating any income” (§35 above). But the question was not whether there was “meaningful business” or “meaningful occupation”. The leases could be genuine leases effectively conferring the EEO, as the TNR, without being a ‘paradigm lease’ without a “meaningful business”. This is powerfully illustrated by the non-sham SPV leases in PAG (2015) and Rossendale (2017). The Judge treated a sham lease as one where there is no meaningful business occupation. That was a material error of law and means the Judge’s determination cannot stand.

I do not accept that the Judge applied a ‘meaningful business’ or ‘paradigm lease’ gloss. She certainly had regard to the absence of any ‘meaningful business’. That was a relevant aspect of artificiality, and Mr Ainsworth-Jackson’s denial of artificiality, to both of which she was entitled to have regard, but she had well in mind that artificiality did not of itself mean sham (§45 above). The Judge asked herself whether the common intention of the TNR was that the NCSCs would never go into AO (enjoying the primary right purportedly conferred) and would never pay the NDRs (the “primary obligation” purportedly imposed), but that was the enquiry envisaged in the Neuberger Formulation from Jones (§14 above), which she quoted (§24 above: Judgment §66). Isle itself had commended that passage to her in its skeleton argument. These were all relevant factors properly taken into account. But there was no misdirection in law. No passage in the Judgment nor in the Case Stated treats a sham lease as one where there is no ‘meaningful business’ or no ‘paradigm lease’, nor does the substance of the Judge’s reasoning do so. This ground fails.

This ground of appeal was formulated by Isle as follows: “The Judge erred in concluding that the leases were shams despite not having made a finding to the effect that Isle and the SPVs actually intended the leases to be ineffective and for Isle to retain an entitlement to excusive possession and to continue to be liable for business rates”. There is a link between this point and Isle’s application to disregard text in the Case Stated (§§25-26 above), which I have refused (§§28-29 above). The essence of

In my judgment, the Judge did make a finding of a common intention not to confer an EEO. As I explained earlier, she was clearly alive to this issue (§29 above), recording the Council’s key contention as follows (§31 above: Judgment §12): “Its case is that despite the appearance of the leases, there was never an intention to create leases where exclusive possession was given to the third party occupiers”. That encapsulation is unmistakeably concerned with the common intention to confer the EEO: “exclusive possession” is the entitlement purportedly conferred by the leases: it is what is “given” by the “leases” under their “appearance”. This was not “luck” (§§26, 29 above). Having recorded the Council’s position, the Judge went on (§24 above: Judgment §§64,

This ground of appeal was formulated by Isle as follows: “The Judge erred in finding that the leases were shams because they had been executed for the ‘sole purpose’ of enabling Isle to avoid paying business rates”. The essence of Isle’s argument in support of this ground of appeal, as I see it, comes to this. It is well-established that an Effective-Avoidance Intent is no basis for finding sham (see §7 above). As the Judge recorded, the Council argued that the leases were “solely a method of rates avoidance” and “executed solely for the purpose of shifting liability for payment of rates” (see §31 above: Judgment §12, Case Stated §§28-29). The Judge accepted that argument, relying expressly – in support of her finding of sham – on the fact that the “sole purpose of these leases” was “to enable [Isle] to deny liability for the business rate” (§33 above); the “sole purpose … to defeat any demand” for NBR (§25 above) which she repeated in her formulation of the question for this Court (§25 above): “was I right to conclude that the sole purpose of these leases was for [Isle] to seek to avoid the liability to pay business rates …” That was a material error of law and means the Judge’s determination cannot stand.

I do not accept that there was any error of law by the Judge in relation to the EffectiveAvoidance Intent and its significance. The Judge did not find sham on the basis that the leases had an Effective-Avoidance Intent: what HHJ Stephen Davies in PAG (2019) at

This ground of appeal was formulated by Isle as follows: “The Judge erred in concluding that the leases were shams despite making no finding to the effect that Isle dishonestly created the leases with the intention of deceiving or misleading others about the true arrangement between the SPVs and Isle. The Judge’s finding that Mr Ainsworth-Jackson was ‘not being honest with the court’ in two respects was insufficient to meet the test for a sham”. The essence of Isle’s argument in support of this ground of appeal, as I see it, comes to this. The Judge did not find that there was a common intention, still less a dishonest common intention, to mislead third parties or a court. Such a “hoodwinking” common intention was never part of the Council’s case, as can be seen from the Judge’s summary (§31 above: Judgment §§11-12, Case Stated §§28-29). The Judge failed to find that this feature was present, which is a necessary precondition to a finding of sham. As a consequence, her finding of sham involved an error of law, legally inadequate reasons and is legally unsustainable.

I do not accept that the Judge erred in law in the ways contended. The Judge rightly recorded (see §24 above) the applicable legal principle (§8 above) by reference to Hitch §66 (“The parties must have intended to create different rights and obligations from those appearing from (say) the relevant document, and in addition they must have intended to give a false impression of those rights and obligations to third parties”), Jones §68 (“the court … must be satisfied that the purported agreement is no more than a piece of paper which the parties have signed with no intention of its having any effect save that of deceiving a third party and/or the court into believing that the purported agreement is genuine”) and Jones §46 (“an allegation of sham carries with it a degree of dishonesty, and the court should be slow (but not naively or unrealistically slow) to find dishonesty”). The Judge expressly recorded Isle’s contention (§31 above: Case Stated §32) that “there was no evidence of dishonesty or pretence in relation to the leases themselves, which granted the right of occupation to the lessees”. Giving a false impression to third parties or a court, as a common intention and with a degree of dishonesty (§§8-9 above) were features which she therefore – rightly – recognised was a necessary element in deciding the ‘sham leases’ issue before her. In finding, in conjunction with her finding of a common intention not to confer an EEO (ground (1) above), that the leases were “solely a method of rates avoidance” (ground (2) above), the Judge was finding an intentional mismatch (as to the EEO) between the ANR and the TNR, for an Effective-Avoidance Intent, by giving a false impression. Reading her reasons fairly and as a whole, the Judge was finding a sham because she was satisfied that the formulations from Snook, Hitch and Jones which she had cited (§24 above) were satisfied. She was rejecting Isle’s contention that there was “no evidence or dishonesty or pretence in relation to the leases” and rejecting the intimately linked contention that the leases “granted the right of occupation to the lessees”. The Judge did not lose sight of the “degree of dishonesty” (reflected in Jones §46 which she had cited) and I accept Mr Hanbury’s submission that it was open to her to find that element satisfied, as in my judgment she did (§42 above). The Judge had in this case precisely what had been identified by Norris J as missing in in PAG (2015) at §41: the

“landlord” as a “party to the present proceedings” to allow a “quality of evidence” to make a finding of dishonesty. Whether Mr Ainsworth-Jackson was ‘honest with the court’ was plainly relevant given that sham is a dishonest common intent to give a false impression to third parties or a court (§8 above). So far as concerned dishonesty, entry into the leases and Mr Ainsworth-Jackson, the Judge was ultimately satisfied that there was at least reckless disregard (§42 above), an approach which was open to her based on the authority of A v A (§9 above) an authority which she cited (§24 above: Judgment §79) precisely because she was addressing this issue. This ground fails.

Isle framed this ground of appeal as follows: “The Judge erred in failing to have regard to the fact that it was a necessary implication of a number of her findings that both Isle and the SPVs did in fact intend for the leases to be effective. The Judge’s conclusion that the leases were shams cannot therefore be explained or justified and accordingly was not rationally open to her”. The essence of Isle’s argument in support of this ground of appeal, as I see it, comes to this. Looking at the substance of the Judge’s findings and reasoning in the Judgment and in the Case Stated, the points she made did not support a finding of sham, quite the contrary. Findings that there was no intention that the tenants go into AO or discharge the NDR liability did not support the finding of sham, for the reasons seen in PAG (2015) at §§41-42. These were unoccupied premises. Throughout the Judge’s reasoning are findings which strongly support the conclusion that the leases were genuine, which conclusion is the necessary implication from the primary facts. There were formal lease documents. There was the payment of consideration by Isle to Crusader. They were intended to be effective in displacing Isle’s NDR liability. Moreover: “There was no caretaker or owner presence on site in relation to any of the units during the periods of the leases.” Isle’s agents were instructed to “cut a set of keys for each of the units, for Crusader to collect” (§37 above). Importantly, there were the findings of refurbishment taking place only at times when no replacement lease was in place (§38 above). There was no finding of a common intention that Isle would “keep the premises available for any third party who

I have not been persuaded by this argument. In my judgment, the Judge reached a conclusion on this factual enquiry (§10 above) which was reasonably – and logically – open to her on the evidence, in the light of her findings, and for which she gave legally adequate reasons. I have reached that conclusion for the following reasons. First, the Judge’s analysis included an application of the Neuberger Formulation. In examining whether there was any intention of the primary right (EEO) being enjoyed (by any AO), and whether any intention of the primary obligation (NDR-liability) being discharged, the Judge clearly had in mind the Neuberger Formulation, which – as I have explained (§14 above) - featured in Rossendale (2017) and was applied in Camelot as the

“justification” for, and “what is involved in”, the External Evidence Enquiry (§11 above), on the basis that “such conduct may give rise to the inference that, at the time it was entered into, the agreement was a pretence”. The Judge specifically quoted the Neuberger Formulation in her description of the legal principles of a sham (§24 above: Judgment §66). She also described it, correctly, as relevant to the approach to

“evidence of sham”. The Judge, rightly, identified the primary obligation purportedly imposed by the leases as the obligation to pay NDR and found that there was no intention of the tenants honouring that obligation (or any other). The Judge, rightly, identified the primary right purportedly conferred by the leases as the EEO and found there was no intention of the tenants enjoying that right. It had been common ground before the Judge that the Neuberger Formulation pointed to a legally relevant enquiry.

The Council’s skeleton argument had submitted that: “A sham transaction is one where the parties have no intention of honouring their respective obligations or enjoying their respective rights”, citing Street v Mountford at 825-826. Isle’s own skeleton argument contained a section on “sham” which relied on Jones at §§45-46 (where the Neuberger Formulation is found) and §68.

Secondly, the Neuberger Formulation reflects an exercise which is a relevant enquiry in considering whether the leases involved an intentional mismatch between the ANR and the TNR so as to give a false impression to third parties or a Court. It is true, as Norris J pointed out in PAG (2015) at §§41-42, that there is a distinction – which is especially important in the context of unoccupied premises – between (a) what the parties intend

Thirdly, the Judge had well in mind the points which Isle emphasises. Points about keys (§37 above) and refurbishment (§38 above), the payment of consideration (§33 above), the absence of owner presence (§36 above), and so on, were relied on by Isle as features indicating that the leases and the EEO were genuine and represented the TNR. The Judge recorded these features and took them into account. She had to consider what to make of them, and the other features of the case, as part of the factual enquiry into the TNR (§§10-11 above). They did not necessarily mean that the leases were genuine. The nature of the exercise of evaluation is, in my judgment, well described in the submission of Counsel in Jones (recorded by Neuberger J in Jones at §58): a party’s “activities could have been undertaken in order to make a sham transaction more convincing”, though “the more that the parties … have acted as if it was genuine, the more difficult it is to conclude that it was a sham”. Here, the Judge’s External Enquiry considered the conduct of the parties, including the features on which Isle did and does rely, recognising them and evaluating them as part of her detailed factual enquiry.

Fourthly, the Judge’s reasoning in relation to snail farming and practical impossibility is highly significant. The Judge reasoned as follows (§39 above): “A genuine lease would have created an exclusive right of occupation” but the Snail Farming Restriction in leases (1) to (5) meant that each lessee “had entered into this agreement, which allowed no legitimate business to take place”. That was because the Units “were offices” and “a snail farm did not and could not have operated there”. I have accepted (see §30 above) that the Judge was there referring to practical impossibility. Isle’s position is that, even if the Snail Farming Restriction was a ‘pretence’, it can be put to one side and does not support a conclusion that the purported conferral of EEO was a pretence. The Judge did not agree, and nor do I. In this part of her analysis the Judge

Fifthly, there was a further important feature of the case, which weighed heavily with the Judge (§41 above). That was the fact, and implications, of the complete absence of any enquiries undertaken by Isle, and by Mr Ainsworth-Jackson with all his experience and day to day control. The Judge found that the absence of any enquiry was because

The answer to the question posed by the Judge in the Case Stated (§1 above) is: “yes – on the facts as you found them to be and which were open to you, and in the light of your reasoning which was legally adequate, and your conclusions which were lawful and reasonable, you were right to conclude that the leases were shams”. There was no legal error, there is no basis and no need to remit the case, and the appeal is dismissed.

My judgment (§§1-60 above) was circulated in draft to the parties in the usual way and for the usual purposes. I have corrected typos and included reference to leases (9) and (10) and Property Alliance (18) Ltd. An important function of circulating a judgment in draft is to be able to elicit submissions on consequential matters, to be able to rule on any contested consequential matter and identify the appropriate form and wording for the Court’s Order, as I will now do. I received emails from Mr Mackenzie which were attempts to ‘critique the judgment’ and persuade me to change ‘the outcome’. These were unsuccessful and the kindest thing is to say nothing further, beyond referring to what is said in the reported Practice Notes in Egan v Motor Services (Bath) Ltd [2007] EWCA Civ 1002 [2008] 1 WLR 1589 at §§49-51 (Smith LJ) and In re I (Children) [2019] EWCA Civ 898 [2019] 1 WLR 5822 at §41 (King LJ). The quantum of the Council’s reasonable costs in this Court and below were agreed. It was also agreed that this Court should summarily assess the costs in this Court. I am satisfied that I can and should deal with the costs in this Court and below, and that Isle must pay those costs. I made the following Order: (1) The appeal is dismissed. (2) Isle is to pay, within 14 days of this Order: (a) the Council’s costs of the appeal, which are summarily assessed in the agreed sum of £23,107.36 and (b) the Council’s costs of the hearing before the Judge, in the agreed sum of £15,772.62. (3) The issuing of the liability orders is remitted to the Judge for dealing with by her or another judge or clerk of the Leeds Magistrates’ Court.

On 23 February 2021 solicitors Addleshaw Goddard LLP wrote to the Court asking that there be added to this Judgment a footnote stating “that the companies referred to in the judgment and adopting the prefix ‘Property Alliance’ (together with Crusader and Mr Terence Ball) have no connection or association whatsoever to Property Alliance Group Limited (CRN: 04454378) or to any business or operations carried out by them or any of their associated companies and which were parties to the proceedings referred to in the judgment as Rossendale (2017), Rossendale (CA), PAG (2015), PAG (2019) and PAG (2020)”. The request invoked CPR 40.9, whose application (“person … directly affected by [the] judgment”) I doubt, but since the request was made and is supported by both Isle and the Council, I am satisfied that it is proper (and sufficient) to record it.