UKI (Kingsway) Limited v Westminster City Council

This appeal raises a short issue as to the requirements for valid “service” of a completion notice so as to bring a newly completed building within liability for non-domestic rates.

Liability for non-domestic rates depends on a property being entered as a hereditament in the rating list. The completion notice procedure, under section 46A of and Schedule 4A to the Local Government Finance Act 1988, as inserted, (“the Act”) provides a mechanism whereby a new building, which has not yet been occupied, may be brought into the rating list. Subject to any appeal, a validly served completion notice has the effect that the building to which it relates is deemed to have been completed on the date specified in the notice. It is then shown in the rating list as a separate hereditament (or hereditaments), and is valued as if it were complete (section 46A(2)). Once the building is so shown in the rating list, its owner (or its occupier if it becomes occupied) becomes liable to an assessment for non-domestic rates.

The procedure is set out in Schedule 4A. Paragraph 1(1) of Schedule 4A provides that, if it comes to the notice of a billing authority that the work remaining to be done on a new building in its area can reasonably be expected to be completed within three months, it shall (unless the valuation officer directs otherwise) “serve … on the owner of the building” a notice, known as a “completion notice”. Paragraph 1(2) contains a similar provision in respect of a new building that has been completed.

The completion notice must (a) specify the building to which it relates and (b) state the day which the billing authority proposes as the completion day (para 2(1)). In the case of a building which has yet to be completed, the completion day proposed should be:

A person on whom the completion notice is served may appeal to the Valuation Tribunal on the ground that the relevant building has not been or cannot reasonably be expected to be completed by the day stated in the notice (para 4(1)). Where an appeal is not withdrawn or dismissed, the completion day shall be “such day as the tribunal shall determine” (para 4(2)). An appeal must be brought within 28 days “after the date on which the appellant received the completion notice …” (Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 (SI 2009/2268) regulation 19(1), made under paragraph 8(2)(a) of Schedule 11 to the Act).

Paragraph 8, which deals with service, provides:

General provision for the service of statutory notices by local authorities is also made by section 233 of the Local Government Act 1972. In particular it provides:

As to the date of service, under such statutory provisions, section 7 of the Interpretation Act 1978 provides:

In January 2009 the respondent (“UKI”) began the redevelopment of a building at 1 Kingsway to provide 130,000 sq ft of office space. In February 2012 the appellant council informed UKI’s agents that it intended to serve a completion notice specifying a completion date of 1 June 2012. It asked the agents to confirm the identity of the owner of the building, but the agents declined to do so without obtaining instructions from their client which were not forthcoming. At that time the building was managed by Eco FM (“Eco”) under a contract with UKI, but Eco had no authority to accept service of documents on its behalf.

On 5 March 2012, the council delivered a completion notice by hand to the building, specifying 1 June 2012 as the completion date. The notice was addressed to the “Owner, 1 Kingsway, London WC2B 6AN”. It was given to a receptionist employed by Eco, who scanned and emailed a copy of the notice to UKI. It was received by UKI not later than 12 March 2012.

On 29 March 2012 an appeal was lodged by UKI’s agents against the completion notice, purportedly “on behalf of Eco”, on the grounds (inter alia) that the service of the notice was invalid. On 7 May 2013, the premises were brought into the list with a rateable value of £2,750,000 with effect (as subsequently corrected) from 1 June 2012. This was met by a proposal on behalf of UKI that the entry be deleted. The proposal was not accepted by the valuation officer and was transmitted to the Valuation Tribunal for determination on appeal.

The appeals against both the completion notice and the inclusion of the premises in the list were consolidated and heard by the Valuation Tribunal (President Graham Zellick QC), which allowed the appeal. That decision was reversed by the Upper Tribunal (Deputy President Martin Rodger QC) [2015] RA 433 but re-instated by the Court of Appeal (Gloster, Macur, and King LJJ) [2017] PTSR 1606.

The Court of Appeal (para 37) recorded as common ground:

that the state of the premises at the relevant time was such that, but for the deeming effect of a completion notice, the premises could not have been entered in the rating list;

that the name and address of UKI as owner of the building could have been ascertained by the council by reasonable inquiry, notwithstanding the fact that UKI had instructed the agents not to divulge its name. Accordingly, the council could not rely on the means of service on the premises permitted by paragraph 8(c) of Schedule 4A to the Act, or section 233(7) of the Local Government Act 1972.

The issue for this court, as identified in the agreed statement of facts and issues, is whether the completion notice was validly served on the date that it was received by UKI, in circumstances where:

it was not delivered directly to UKI by the council, but passed through the hands of the receptionist employed by Eco, who was not authorised for that purpose by either party;

it was received by UKI in electronic rather than paper form.

It is common ground that, by virtue of the opening words of paragraph 8 of Schedule 4A to the Act, the three specific methods there set out do not exclude other methods of service available under the general law. There is no serious dispute as to what that entails. In Sun Alliance and London Assurance Co Ltd v Hayman [1975] 1 WLR 177, 185 CA (a case under the Landlord and Tenant Act 1954), Lord Salmon said:

Specific statutory provisions such as paragraph 8 are designed, not to exclude other methods, but rather to protect the server from the risk of non-delivery. As was said by Slade LJ in Galinski v McHugh (1988) 57 P & CR 359 (in relation to a similar service provision in the Landlord and Tenant Act 1927 section 23(1)):

More controversial, and relevant in the present case, is whether it matters that the notice reaches the intended recipient, not directly or through an agent authorised for that purpose, but by the action of a third party.

On this point we were referred to an observation (obiter) of Sir Robert Megarry V-C in Townsends Carriers Ltd v Pfizer Ltd (1977) 33 P & CR 361. That concerned a break option in a lease exercisable by either party upon the giving of written notice to the other. The premises were used by U Ltd, an associated company of the defendant, and correspondence relating to rent demands and other matters had been between that company and WT Ltd, an associated company of the claimant. It was held that a notice given by U Ltd to WT Ltd was valid, on the basis of an assumed general agency arising from past conduct, even though neither company was expressly authorised for that purpose.

The Vice-Chancellor also noted but rejected an argument that the relevant clause required the tenant to “give” notice to the landlord, and that, although the landlord had ultimately received the notice, “no notice had ever been given to the landlord as such”. He said:

The other main issue in this appeal is whether it matters that the notice was received by UKI in electronic form.

We were referred to no direct authority on service of a scanned copy of a notice by email. However, Mr Kokelaar for the council relied on two earlier authorities in which delivery of notices by fax was accepted as valid. In Hastie & Jenkerson v McMahon [1990] 1 WLR 1575 the Court of Appeal accepted that service of a list of documents by fax was valid service for the purposes of a consent order in civil proceedings under the Rules of the Supreme Court. In the leading judgment, Woolf LJ said:

The other authority to which we were referred on this point was PNC Telecom plc v Thomas [2003] BCC 202. Sir Andrew Morritt V-C held that a letter sent by fax constituted a validly “deposited” notice to convene an extraordinary general meeting under section 368 of the Companies Act 1985. The Vice-Chancellor noted that by that time the Electronic Communications Act 2000 (“2000 Act”) enabled specific modifications to be made to authorise communication by electronic means under existing statutes, including the Companies Act. Some such modifications had been made, but not in respect of section 368. Counsel before him had been unable to indicate the basis on which some of these provisions had been singled out for amendment but others not (para 14).

In any event, he did not think that the 2000 Act could be regarded as designed to introduce fax as a permitted means of communication “for that had been done on a case-by-case basis over the preceding 30 years or so” (para 16). Among other authorities he referred to the words of Woolf LJ set out above. He also noted with agreement observations of Laddie J in Inland Revenue Comrs v Conbeer [1996] BCC 189, on the potential advantages of delivery by fax in terms of reliability and speed. He saw no reason why fax transmission should not give rise to a valid “deposit” under section 368, in circumstances where no-one had been misled or disadvantaged, and the “ultimate result is exactly the same as if it had been transmitted in person or by post” (para 22).

The principal dispute on this part of the case is whether these authorities can be relied on as extending to a copy sent by email, having regard in particular to the provisions made in that respect by the 2000 Act. Section 8 empowers Ministers to make regulations to modify primary and secondary legislation for the purpose of authorising or facilitating the use of electronic communications. Electronic communication is widely defined as including any form of communication transmitted “while in an electronic form” (section 15(1)). In respect of non-domestic rates (and council tax) specific regulations have been made for the use of electronic billing in certain circumstances, and subject to particular restrictions: see the Council Tax and Non-Domestic Rating (Electronic Communications) (England) Order 2003 (SI 2003/2604). Thus for example provision is made for the service of certain forms of notice to be given to a person by sending the notice “by electronic communication to such address as may be notified by that person for that purpose” (see article 4). No such modification has been made in respect of completion notices.

In the Valuation Tribunal (at para 38), the President thought that, even accepting the formulation by Peter Gibson LJ in the Tadema Holdings case (para 15 above), there had been no delivery of the actual notice to the owner. In his view intended recipients were entitled to receive the original of any formal notice, in the absence of an expression of willingness to accept electronic service.

The Upper Tribunal took a different view. The Deputy President found it difficult to accept that:

The Court of Appeal’s conclusion turned principally on what they understood to be the “natural or normal usage” of the statutory language. As Gloster LJ said;

She also attached weight to the statutory context:

On the question of “indirect service” she did not think that the observations of Sir Robert Megarry V-C could be treated as of general application:

For the council, Mr Kokelaar adopts the reasoning of the Upper Tribunal, as supported by the authorities to which I have referred. In summary, he submits, the words “serve” and “service” in Schedule 4A should be given their ordinary meaning, that is delivery of a document to a particular person. Under general principles, a notice (under statute or contract) is regarded as having been served if it has been received by the intended recipient. In this case the notice was received by UKI and served its statutory purpose of communicating to UKI the completion date proposed by the council, and it was acted upon by UKI. As in Townsends Carriers the fact that it passed through the hands of the receptionist did not invalidate service. Alternatively, the receptionist must be taken as having been impliedly authorised to pass it on to UKI. In relation to service by email, the reasoning of the authorities on service by fax is indistinguishable. There is nothing in Schedule 4A, or in the 2000 Act, to exclude service of a completion notice by electronic means, where the ultimate result is exactly the same as if a hard copy had been transmitted in person or by post.

For UKI Mr Kolinsky QC supports the reasoning of Gloster LJ in the Court of Appeal. In particular he adopts her three-stage analysis of the relevant provision, arguing that the council failed at the first stage, that is the requirement for service on the owner by the billing authority. Whatever method is adopted, it must be the authority itself (acting through its officers) which effects the service. Service through a third party, which is neither the owner’s agent nor duly authorised to act on the authority’s behalf, is not service on the owner by the authority.

Further, Mr Kolinsky submits that the involvement of the Eco receptionist broke the necessary chain of causation. Mr Kokelaar’s suggestion that the receptionist had implied authority to act for the council was misplaced, having regard to the detailed statutory scheme governing delegation of local authority functions. It would have been different if for example the council had used a process server under its contractual control to carry out personal service. Use of such a method might be authorised as incidental to the authority’s functions under section 111(1) of the Local Government Act 1972, without involving any unlawful delegation. He relies on statements by the Court of Appeal as to the permissible use of contractors or agents under that section, in Crédit Suisse v Allerdale Borough Council [1997] QB 306, 359G per Hobhouse LJ.

Mr Kolinsky also repeats Gloster LJ’s emphasis on the need for certainty in a taxing statute. In that context he relies on paragraph 2(3) of Schedule 4A to the Act where (in relation to a completed building) the authority is required to specify the date of service as the date from which liability is to begin. There can be no such certainty if the council has no control over the process by which the notice reaches the recipient.

On the issue of electronic communication, he points to the fact that ministerial intervention was considered necessary to authorise the use of such communication in some aspects of the non-domestic rating scheme, while no such intervention was made in respect of completion notices. This carefully drawn scheme would be otiose if there existed some common law rule permitting the use of electronic service as a generality. Further the limitation of electronic service to cases where the ratepayer had assented by providing an address for electronic service would make no sense if the authority were able to serve without the ratepayer’s consent.

The method of attempted service adopted by the council was far from ideal. As already noted, the purpose of specific provisions such as paragraph 8 is to provide reliable methods of service and to minimise the risk to the council of non-delivery. Given that, as is now accepted, the name and address of the owner could have been discovered by reasonable inquiry, it is not clear why this was not done. We have had no satisfactory explanation for this failure, nor indeed for the failure to take corrective action when the objection to service was raised. Nothing in this judgment should be taken as detracting from the good sense of the President’s observation (Valuation Tribunal, para 43):

The difference between the Upper Tribunal and the Court of Appeal comes down to a narrow point. The Upper Tribunal thought that, since the notice issued by the council reached the hands of the intended recipient, it mattered not that the route was “unorthodox”. Gloster LJ thought that this approach failed to give effect to the concept of “service on the owner by the authority” (emphasis added). For my part I would accept that the means by which the notice arrives at its destination is not wholly immaterial. In itself the reference to the billing authority is simply to identify the body responsible for service; it says nothing about how that is to be done. The real issue, as I see it, adopting the words of Lord Salmon in the Sun Alliance case, is whether the authority “caused” the notice to be received by UKI. In other words there must be a sufficient causal connection between the authority’s actions and the receipt of the notice by the recipient.

Mr Kolinsky appeared implicitly to accept that analysis, but he submitted that the chain of causation was broken by the interposition of a third party in the form of the Eco receptionist. He challenged Mr Kokelaar’s suggestion that the receptionist was given implied authority to serve the notice, at least in any formal sense. To that extent I would agree with him; but it is unnecessary and unrealistic in my view to introduce concepts of agency or statutory delegation into this simple sequence of events. As the Deputy President accepted, the Eco receptionist, on receiving from the council officer a hand-delivered notice addressed to the “Owner”, did no more than would reasonably be expected of a responsible employee in that position: that is, pass on the notice to the person to whom it was addressed. It was the natural consequence of the council’s actions.

Mr Kolinsky objected that the receptionist was not under the control of the council, as would have been for example a process server acting under contract. However, causation does not necessarily depend on control. Mr Kokelaar countered with the example of a notice correctly addressed, but mistakenly delivered to a neighbouring address and then passed on by the occupant to the intended recipient. Like him I see no reason why that should not be treated as effective service under ordinary principles of causation, even though the friendly neighbour was not under the control of either party.

This approach to indirect service is consistent with that of Sir Robert Megarry V-C in the Townsends Carriers case. I would agree with Gloster LJ (see para 29 above) that his words cannot be read as intended to embrace “all situations” where ultimately the intended recipient “has come to know of the contents of the notice”. There needs to be actual receipt of the notice, and a sufficient causal link with the actions of the council.

Of the cases to which she referred, Fagan v Knowsley Metropolitan Borough Council provides no assistance, because, as she acknowledged, it was concerned with a mandatory statutory code. More pertinent perhaps is her reference to cases relating to service of notice on solicitors. As she says, service of a notice on a solicitor who does not have his client’s authority to accept service of the particular notice is not in itself valid service.

She cited Glen International which concerned service of a notice by the landlord in relation to leasehold enfranchisement. It is true that, having found that the tenant’s solicitor on whom the notice was served had no authority to accept it, the court did not go on to inquire whether the notice was in fact passed on to the tenant. It is also true, as Gloster LJ noted, that Townsends Carriers case was referred to as a decision “on the particular facts”, but that seems to have been on the agency issue. There is no indication that the case was used to support an argument based on indirect service; nor indeed that there was any evidence that the solicitor had passed on the actual notice, nor any reasonable expectation that he would do so. That situation is readily distinguishable in my view from the purely mechanical role played by the receptionist in this case.

A further argument against the Upper Tribunal’s approach was the potential uncertainty it leaves as to the date of service. As Mr Kolinsky points out, it may be important not only for both parties, but also for the valuation officer, to be able to identify the date of service with precision. Thus, in respect of a building which appears to have been completed, the date of service must be identified in the notice (paragraph 2(3)), and, subject to appeal, is treated as the “completion day” so triggering liability to rates. In respect of a building yet to be completed the proposed completion day must be not later than three months “from and including” the date of service (Schedule 4A, paragraph 2(2)).

The difficulty with this argument, in my view, is that some uncertainty in this respect is inherent in the legislation, in which neither the methods of service, nor the dates of service in different circumstances, are exhaustively defined. The simple answer for the authority may be that, where the date of service is critical, it is able to choose a statutory method which eliminates or minimises the risk of the notice being rendered invalid by failure to specify the correct date of service. If it chooses a non-statutory method it must bear that risk. The risk of prejudice to the owner is limited, since outside the statutory grounds service depends on actual receipt by the intended recipient, and the time for appeal is also related to receipt.

In spite of the misgivings expressed by Lloyd LJ in the Hastie case, it does not appear that the reasoning of the majority has been questioned in any subsequent cases, before or since the enactment of the 2000 Act. Notably it was applied in the PNC Telecom case notwithstanding the recognition that modifications had been made under the 2000 Act to other parts of the Companies Act 1985. Although those cases were concerned specifically with fax transmission of a copy of the relevant notice, no good reason has been suggested for distinguishing that from transmission by email as in this case.

Given that this was the state of the general law immediately preceding the enactment of the 2000 Act, Parliament must be taken to have legislated against that background. Mr Kolinsky would need to point to some provision of that Act which expressly or impliedly restricts the previous law, or overall inconsistency sufficient to overcome the general presumption that Parliament does not intend to change the common law (see Bennion on Statutory Interpretation sections 25.6, 25.8). In my view he was unable to do so. Nor did he refer to any authority to support such a submission. It is not enough that the new law may overlap in certain respects with the general law. The purpose of the 2000 Act, as stated in its long title, was to make provision “to facilitate the use of electronic communications …”. There is nothing to indicate an intention to cut down the existing law.

Against the background of the detailed scheme established by or under the 2000 Act, it may seem anomalous that the same result may be achieved in some cases by more informal means. However, the purpose of the Act and Orders made under it is to provide a clear and certain basis for the routine use of such methods by authorities. That purpose is not undermined by a conclusion that under general principles, and on the particular facts of this case, the notice was successfully served.

For these reasons, in respectful disagreement with the Court of Appeal, I would allow the appeal and restore the order of the Upper Tribunal.